Will an extension increase the value of my home?

Dinner party conversations can be dominated by a common theme – the discussion of new builds that leaves the comparatively simple idea of an extension on the sidelines. The dinner invitation normally stems from the couple that have just built their new home in an established inner suburb, with mature trees the only sign of the block’s history, and they want to show it off.

The mere thought of building from scratch, or a move, is too much to cope with for some.  For those who have outgrown their current home,  the solution tends to be steered towards an extension. They are enticed by maximising every square metre of the block to provide a large family home and, of course, the hope of boosting the profit when eventually sold.

Canberrans have certainly embraced major alterations to their homes, pumping almost $123 million in to the local economy during 2017 based on ABS Construction Work Done figures for the ACT (seasonally adjusted). The value includes structural alterations, extensions, additions and conversions to existing homes.

The value of alterations completed during 2017 is a slide from the previous annual peak in 2015 at just over $133.6 million and well below the record notched in 2011 at a whopping $164.126 million.

With the rising cost of housing and tighter lending conditions, a shift towards the extension could be on the way. Let’s not forget Canberra’s current median house price is a cool $753,516 as of the December 2017 quarter. House prices have risen 8.4 per cent during the past year and 32.1 per cent during the past five years.

The value an extension can add to your home depends upon several factors, from the length of time you will continue to live in the home, to the scope and quality of the work completed.

Ideally, investing in an extension should be viewed as a mid to long-term prospect, giving you the enjoyment of the added floor space in the meantime.

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If the prospect of moving is on the horizon, the short-term approach could be to obtain the planning permission and avoid building. Depending upon the scope of work, often the financial outlay of acquiring the appropriate approvals can become added value when selling.

Decide whether you’ll be in your current home for the next year or two, or perhaps decade, to help determine whether the value added will outweigh the cost of the extension.

Your own financial situation is also a key factor when deciding to invest in an extension, dependent upon your current mortgage size, the funding required for the extension and the potential homes value. No one wants to risk the situation of negative equity. That said; do consider the quality of life factor that adding an extension can bring. Which is why a number of homeowners choose to extend regardless of the boost to the homes value.