The Best Ways To Add Value

This week, David Kuo’s 2012 prediction is that house price-to-earnings ratio will improve for the first time since 1995.

In practical terms, this is good news if you’re buying a home in 2012, as it should mean mortgages are a bit more affordable.

But what about selling your home in five years’ time? If the slowdown in the housing market continues, this may become harder to do.

Using some of your increased wage packet to make your home more saleable should help you keep ahead of the game.

So, here’s a quick guide to which alterations add the most value to your home.

1. Loft conversion + 21%

According to a study by Nationwide, a loft conversion is easily the single most valuable alteration you can make to your home.

By adding 300 square feet of floor space – and then incorporating an extra bedroom and bathroom – you could add over 20% to the value of your property. Starting with a house worth £200,000, this is a potential price increase of £42,000.

The estimated cost of this sort of conversion is just over £17,000 – a hefty sum, but very often a good-value investment.

2. Another bedroom + 12%

Just adding an extra bedroom can make your house price zoom up. Turn a two-bedroom house into a three-bed by adding a double bedroom, and you’ll typically increase its value by 12%.

However, it’s worth bearing in mind that this figure is based on increasing the amount of floor space available (by, for example, extending over the garage).

Fiddling about with existing floor space to produce the extra room generally adds less value – around 6% for the same sort of property.

3. Central heating + 6.8%

A big majority of UK homes now have central heating – and if yours doesn’t, you’re missing out on a big chunk (just under 7%) of added value. That makes a £200,000 house worth around £214,000.

The installation of a full gas heating system currently costs around £5,000 – so it definitely seems a cost-efficient investment to make. And of course, a newer, energy-efficient system can also save money on utility bills.

4. Parking + 6.5%

Simple but effective. Squeezing a parking space onto your property can add well over 6% to its value. Build a double garage and the value rockets by some 14.5%.

5. An extra bathroom + 5.2%

And finally, an extra bathroom can make a big difference. Although houses with two or more bathrooms have become more common in recent years, adding an extra one can still boost the price of a one bathroom property by over 5%.

Just make sure you plan carefully when you undertake all these home improvements.

According to a recent Halifax report, one in four major home improvement projects overshoot their budget each year.

Apparently, getting carried away with fixtures and fittings is the major source of increased costs, with kitchen makeovers the most likely to spiral out of financial control. So draw up a budget, then stick to it!

Across the UK, from peak to trough

According to the Halifax HPI, here are the figures for the top and bottom of the housing crash for the UK as a whole:

High/Low	House price (£)
Q2 1989	69,850
Q3 1995	61,115
Difference (£)	-8,735
Change (%)	-12.5

Therefore, in the 6¼ years between mid-1989 and the end of September 1995, the average UK property lost an eighth (12.5%) of its value. However, most of this fall occurred from 1989 to 1992. House prices then drifted up and down during 1993 to 1995 before setting out on a twelve-year winning streak.

So, that’s the situation for the United Kingdom as a whole. Now let’s find the individual peaks and troughs for each of the UK’s twelve regions (in alphabetical order):

East Anglia

High/Low	House price (£)
Q4 1988	86,493
Q1 1993	57,200
Difference (£)	-29,293
Change (%)	-33.9

As you can see, the property market peaked earlier in East Anglia than it did in the UK as a whole, and prices started to recover much earlier, hitting a low in early 1993. However, the plunge was much more painful in the fens, with prices dropping by more than a third in 4¼ years. Ouch!

East Midlands

High/Low	House price (£)
Q2 1989	65,862
Q3 1995	52,618
Difference (£)	-13,244
Change (%)	-20.1

The East Midlands peaked and bottomed out at the same points as the UK as a whole, but the decline was steeper at a fifth (20%). Thus, homebuyers in this region suffered a bit more than those in the UK generally.

Greater London

High/Low	House price (£)
Q4 1988	105,234
Q1 1993	75,832
Difference (£)	-29,402
Change (%)	-27.9

London peaked six months earlier than the rest of the UK and began its recovery in early 1993 – 2½ years ahead of the rest of the UK. Today, many people view London as a housing ‘fortress’ which will avoid much of the pain to come. Alas, history tells a different story, with a peak-to-trough loss of 28% in just 4¼ years. Yikes!

Northern Ireland

Northern Ireland is an interesting case, as it largely avoided the boom and bust experience elsewhere. This is in part thanks to its geographical separation from the rest of the UK, and partly due to the political and social situation that existed before ‘The Troubles’ ended. Indeed, apart from a 0.9% drop in 1989 and a 2.5% fall in 1992, NI property prices have risen every year since 1984.

Amazingly, the average property in the Six Counties is now valued at £216,255, compared to £197,071 for the rest of the (much higher-earning) UK. Thus, in my view, the housing bubble in NI is under the greatest pressure and will burst spectacularly. The outcome will be far from pretty!

North West

High/Low	House price (£)
Q2 1991	60,787
Q4 1995	52,158
Difference (£)	-8,629
Change (%)	-14.2

Property prices in the North West peaked much later, with the top arriving two years after the UK peak. Then again, they began recovering at roughly the same time. However, NW prices dropped slightly more than the UK as a whole, down a seventh (14%) over 4½ years.

North

High/Low	House price (£)
Q4 1991	54,968
Q3 1995	48,750
Difference (£)	-6,218
Change (%)	-11.3

The North did rather well in the last property downturn, with the average price peaking much later at the end of 1991. However, prices started rising in Q3 1995, in line with the rest of the UK. Thanks to its shorter ‘property recession’, prices in the North declined a mere ninth (11%) during its setback. That’s a slight improvement on the UK in general.

For the record, here’s how the average price fell over the entire nation:

High/Low	House price (£)
Q2 1989	69,850
Q3 1995	61,115
Difference (£)	-8,735
Change (%)	-12.5

Now let’s look at the highs and lows of the remaining six regions:

South East

High/Low	House price (£)
Q1 1989	106,179
Q4 1992	73,556
Difference (£)	-32,623
Change (%)	-30.7

It may come as a surprise to many people in the affluent South East just how steeply prices fell in the last bust. In under four years, prices dropped by more than three-tenths (31%), plunging many homeowners into negative equity (when a property is worth less than the mortgage secured on it). So much for the South East being a safe haven when times are tough!

South West

High/Low	House price (£)
Q1 1989	85,634
Q4 1992	60,522
Difference (£)	-25,112
Change (%)	-29.3

The South West followed an identical path to its neighbour the South East, peaking in early 1989 and bottoming out at the end of 1992. However, house prices fell slightly less in percentage terms, but were still down nearly three-tenths (29%) in the Nineties collapse.

Scotland

Like Northern Ireland, Scotland pretty much avoided the last property plunge. Sure, prices wobbled about a bit throughout the Nineties, but the trend never headed resolutely downwards. For the record, prices declined as follows:

Year	Annual decline (%)
1992	-3.0
1994	-0.1
1997	-2.1
2000	-4.3

So, Scots managed to avoid the worst of the UK property depression, but this may not happen again this time around.

West Midlands

High/Low	House price (£)
Q2 1989	68,931
Q2 1995	60,441
Difference (£)	-8,490
Change (%)	-12.3

Of all the regions of the UK, the West Midlands most closely reflects the results for the property market as a whole. Prices fell closely in line with the UK average, making this region perhaps the most ‘average’ of all during the last crash.

Wales

High/Low	House price (£)
Q1 1990	57,453
Q2 1995	49,674
Difference (£)	-7,779
Change (%)	-13.5

Prices didn’t peak in Wales until Spring 1990, and then fell slightly more than the UK as a whole until they began to recover in late 1995. There’s nothing remarkable to report here.

Yorkshire & Humberside

High/Low	House price (£)
Q1 1991	55,928
Q3 1995	50,249
Difference (£)	-5,679
Change (%)	-10.2

Lastly, we come to the twelfth of our regions. Yorkshire folk have a well-deserved reputation for financial prudence. This may explains why Y&H it performed much better than any other English region, with prices declining by little more than a tenth (10%).

So, what conclusions can we draw from the above data? All it tells us is that the UK is far from being a single, homogeneous housing market. Regional differences will always prevail, because housing markets are primarily local beasts. Furthermore, this look back at the past doesn’t help us to forecast the future. Then again, as Mark Twain is said to have remarked,

“History does not repeat itself, but it does rhyme.”

Buy to let is booming in the current climate

Following the rally in the stock markets this week, it becomes more important than ever for property investors to find growth markets for their capital and the prospect of more steady returns.

Our experience at Ashkey Property Investment Ltd with regards to property investment has shown that the UK market offers good value. We have found that the secret is to select investments which identify important values in where there is promise of long term growth. We have a good record of successively exploiting [on behalf of our clients] growth markets to their full potential.

January has been a busy time for Ashkey Property Investment Ltd with our regular property investors and new investors alike who have been taking advantage of the excellent values on offer at present before the property market innevitably picks up again.

With at least one possible future interest rate cut predicted as early as February, the outlook for property and long term investors looks bright as Ashkey Property continues to find excellent investment opportunities for 2008.

News Update

Commercial real estate prices fell 10 percent in 2007, including a 4.2 percent drop in December, as turmoil in the credit markets caused investment to slow and hurt demand for office space. Retail spending also stalled as consumers struggled with the impact of higher mortgage payments.

“Because of the speed of repricing, there will be income- producing investment properties that will be attractive,” Chief Executive Officer Francis Salway said on a conference call with reporters. That may come sooner than we originally thought.”

This year, the stock has added 7.6 percent, while the benchmark FTSE 100 Index has slumped 11 percent and the FTSE 350 Real Estate Index, which also had its biggest gain in 22 months, has advanced 5.1 percent.

The FTSE 350 Real Estate Index plunged 38 percent in 2007, compared with the FTSE 100 Index’s 3.8 percent gain.