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A kitchen renovation provides the most bang for your buck when increasing a home’s potential resale value, a new survey has found.
Yet a local realtor suggests homeowners think twice before paying tens of thousands of dollars to upgrade their kitchen or undergo other costly renovations if their intention is to maximize the sale price of their home.
“On the whole, renovating your home is not a bad idea,” says Doug Smilski, realtor with Royal LePage Noralta Real Estate in Edmonton.
“But when you do a renovation, you should know that you may not see a comparable return on investment when you sell your home, so a big renovation should really be more about enjoying it while you live there.”
Still, the recent Royal LePage Home Renovation Return on Investment survey of more than 400 real estate professionals found a newly remodelled kitchen could on average add 20 per cent to a property’s total value.
That’s the highest return on investment among all renovations on the survey’s list of 13 improvements, which included everything from pools to home offices and eco-upgrades.
“Most homeowners would like to know where they should invest in their home and what renovations offer the best return on investment,” says Mike Heddle, broker at Royal LePage State Realty in Hamilton, citing the reasoning behind the study.
Other renovations resulting in the most beneficial impact were a bathroom remodel, ranking second and adding on average about 16 per cent to the value of a home, and a finished basement, in third spot, which provided potentially a 15 per cent boost.
“It’s nice to continue to see kitchen and bathroom renovations offering the largest returns,” Heddle says. “That’s pretty congruent with what we’ve seen over the years.”
He points to another finding, however, that is likely a result of the more recent rise in the average price of a home, which has increased in Canada from about $250,000 in 2006 to about $750,000 today, according to Canadian Real Estate Association figures.
Basement rental suites ranked No. 4 on the list, essentially tied with a finished basement, adding about 15 per cent in value.
“As we see prices continue to rise, many buyers likely see those suites as providing income potential to help carry some costs of ownership,” Heddle explains.
Other renovations making the list included new windows (13 per cent); new interior paint (11 per cent); an outdoor entertainment space (10 per cent) and landscaping (10 per cent).
Some renovations like a home office and pool — potentially adding a seven and six per cent boost respectively — likely have seen more demand among buyers as a result of the pandemic.
“With a lot of restrictions, pool companies have seen more business,” he says.
Other listed renovations were eco-upgrades and driveway improvements, both adding seven per cent to a home’s value.
Despite their potential, high demand for homes from the pandemic has also led to a reluctance among buyers to do renovations to prepare their home for listing, the study found.
Among professionals surveyed, 59 per cent noted clients seeing less benefit in the midst of peaking market demand while 57 per cent indicated clients worried about rising labour and material costs.
To Smilski, these findings speak to the risks of major upgrades for individuals seeking to generate more interest from buyers when listing.
“In simple terms, do renos to enjoy them.”