We often have clients seeking our advice about building and the potential to over-capitalise on their property. When it comes to property values and trends in the market place, we recommend that they do their research and speak with leading real estate agents to have a better understanding of the value of a location.
We also ask them what their plan is for the future. Why? Because there is a financial return on your investment, but there is also an emotional return on investment (ROI).
If the plan is to build and sell straight away, then cost increases in priority. This is because there is only a financial ROI - there is no emotional ROI.
If however, the plan is to live in the house for 5 or more years; then over-capitalisation becomes harder to predict or define. Firstly, when it comes to the financial ROI, you would have to predict what is the market going to be like in 5 years time and what impact has inflation had in those 5 years? Secondly, you have to estimate what the value is of your emotional ROI. What figure do you place on having lived in your new home over the last five years? When you build the house of your dreams, there are daily benefits and pleasures that you simply can't put a figure to.
The final piece of the puzzle is what is the added value of an 'architect designed' house?
The market is full of project homes and builder designed homes and there is little to differentiate this house from that house. There is nothing special about them and subsequently there is no emotional attachment. So if you miss out on this house at an auction, there is another one for sale three streets away. Therefore, potential buyers are less likely to offer big dollars.
Last weekend, one of our projects went to auction. It was a little emotional for us as the architects, as we felt like we were losing one of our children. The agents guide was $3.0 to $3.3M. The reserve was $3.55M. The property was on busy Centennial Avenue, Lane Cove.
Photo: Belle Property Lane Cove
The design turned what could have been a negative into a positive by creating a series of pavilions (hence why it is called the Pavilion House) that stretched out along the block. The pavilions created the opportunity for delightful courtyards that allowed sunlight and cross ventilation into all rooms of the house. It also moved the living areas away from the street to create a quiet, peaceful retreat. The clients said "We wanted to feel from the moment we stepped foot onto our property, we were washing the workday behind us and stepping into our own sanctuary".
The design is unique and specific to this piece of land and if you can create that harmony between home and land, then you can create the emotional response.
So then followed the month long campaign from Belle Property Lane Cove which featured some wonderful interior styling by the clients. The agent James Bennett said they had 60% more buyers through the property than the average for open houses in Lane Cove. Many of the potential purchasers used the open home inspections to just sit and enjoy the space and build that emotional attachment. Finally, the Pavilion House went to auction. After 20 minutes in 40 degree heat, the house sold for a new record in Centennial Avenue, a staggering $1,200,000 above the previous best sale!
“It was the best house to sell in Lane Cove this year,” Mr Bennett said. “If you have great architecture, big block and a grand floor plan, you can get an incredible result on any street,” he said.
So what should you do? Trust your instincts, ask for advice. Don't underestimate the emotional investment you make in building your home. It can ultimately be far more significant than a financial return. Unless you are specifically building to sell, we would recommend you build what you want. Life moves too fast. Children grow up too fast and the opportunity to create memories that last a lifetime can slip through your fingers. Design and build a home that is your palace and enjoy every day living in it. When the time comes to sell, what will be will be, but until then you have your dream home.
“Life is what happens to you, while you're busy making other plans”