To Renovate or To Relocate?

Date: 2008-09-08

With spring in the air, we’re all starting to feel energised and ready to revitalise our living space. Some of you may consider a complete change of habitat, while for others knocking down a wall or two will do. Renovating or relocating is not a decision that should be taken on a whiff of spring blossoms, but one that should involve all family members.

Cost of relocating

As an illustration, let’s look at the approximate cost of replacing your home valued at R1.5 million with a property of R2.2 million.

Estate agent fees at 5% (VAT included)	R85 500
Cancellation cost of existing bond. You need to give the bank 90 days’ notice of your intention to cancel the bond, otherwise you will be liable for up to 3 months’ penalty interest.	R1 430
Transfer cost on the property of R2.2 million (in the name of an individual)	R140 000
Registration fee on a bond of R1.8 million (assuming that you have a deposit of R400 000)	R11 800
Bank initiation fee	R5 700
Total	R244 430

In other words, relocating to a property with a market value R700 000 higher will set you back by R244 430! One wonders if one shouldn’t consider building that extra room for this amount, adding value to the existing property, instead of paying for services that add no value to the asset.

Under the current market conditions, it may take longer to sell your property than to find a new one. Hence, it is best that you sell first. It also gives you more negotiating power when you are able make an unconditional offer. It’s vital that you specify the transfer and occupation dates correctly, so that you don’t end up without a roof over your head.

You know what you have, but you don’t know what you’re going to get.

If you have been living in your house for some time, you are aware of the cracks and leaks. You know the quality of the building and are aware if any funds need to be spent on repairs and maintenance.

When you purchase a new property, you are buying it “voetstoots”, without any guarantees. Leaks and cracks have probably been mended to make the property marketable and, more importantly, you’re not aware if electrics and plumbing are outdated, which often happens with older buildings. You don’t know what you will end up spending. To lessen this problem, we recommend that you use the services of a property inspector such as Inspect-a-Home.

Even brand new properties are subject to their own aggravations, such as “settling cracks”, leaks and poor workmanship, which will only become evident a while after you’ve moved in.

Cost of renovating

Depending on your choice of materials and finishes, you can budget on R5 500/m2 upwards. It is strongly recommended that you add approximately 30% to any quote you receive, as you might change your mind along the way and contractors are seldom able to stick to the original quote.

You must also take into account whether you will be living on the premises or whether you will be moving out and renting while building is in progress. What will happen to your belongings? Are you able to store them on the property or will you incur an additional storage expense?

Cost of your sanity and emotional well-being

Stories of a pleasant building experience, where everything ran smoothly, all was done to the satisfaction of the property owner and the project was completed on time, are few and far between. Be prepared to experience huge frustrations while renovating.

Consider the stress to family members of having strangers covered in cement and mud moving in and out of your home on a daily basis, working odd hours and making a mess of your garden. No matter how cautious everybody is, being surrounded by dust and noise is inevitable.

I trust that your relationship can withstand the endless arguments about the colour of the walls, Italian or Travertine finishes and how contractors are managed. And when they’re out of their comfort zone, children become the most unsympathetic human beings. Renovating can be a very stressful situation for all concerned.

Beware of over-capitalising

A home is normally viewed differently to an investment property. While you need to be aware of the market value of properties in your area, you also need to be comfortable in your living space. If you need to increase the value of your property to an amount substantially higher than the average market value of other properties in your area, you should perhaps consider relocating instead of renovating.

Whether you opt to renovate or relocate, a thorough thought process will contribute to a satisfying and invigorating experience. Nothing is more uplifting than the smell of fresh paint, redecorating a living area and adding soul to mere bricks and mortar. Take the time to enjoy the fruits of your investment.

Tess Rodrigues
Managing Director

To Renovate or To Relocate?

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