Renovate for profit: New Zealand residential case study

Abstract

Purpose

The primary purpose of this paper is to test an appropriate methodology for quantifying a return to residential property homeowners who were committed to make improvements to their homes prior to placing on the market for sale.

Design/methodology/approach

This is a pilot study where empirical data were collected via two survey instruments from nine homeowners within the Horowhenua/Manawatu region of New Zealand. Market values of the properties before and after home improvement were assessed using a variety of market value measures including a valuation by a registered valuer, property owner's assessment and sale price.

Findings

The findings reveal that both the registered valuations and the property owner's assessment of expected sale price was within the range ±8 per cent of the final sale price. Seven of the nine houses included in this pilot study showed a positive return on time and money invested in minor home improvements.

Research limitations/implications

Limitations relate to the dated data, small sample size and geographical spread of the sample. The time and cost required to gather home improvement activity data is another limitation.

Practical implications

Potential exists for the model developed in this paper to be replicated internationally. This paper supports the view that homeowners who are actively involved in the real estate market have an accurate assessment of the value of their own homes. Improvements increase the quality and condition of existing residential housing stocks. Minor improvements are often overlooked due to the cost of gathering data. This paper encourages further studies of minor improvement expenditure on residential property.

Originality/value

This paper adds to the body of renovation literature as the data collection was conducted at the time improvements were being made, thus reducing response errors. The inclusion of comprehensive valuation reports by registered valuers increased the reliability of market value assessments. Research in this area is useful to provide greater understanding of the benefits of minor improvement expenditure.

Citation

Fortes, R. and McCarthy, I. (2010), "Renovate for profit: New Zealand residential case study", Property Management, Vol. 28 No. 5, pp. 358-369. https://doi.org/10.1108/02637471011086545