It's a New Year so let's raise the roof!

The Christmas and New Year are a time spent planning for the future and one of the topics families talk about is their property and whether they should move home. The other option discussed is whether they could improve their lifestyle by redecorating, refurbishing the bathroom or kitchen; or even extending the property.

A number of commentators have remarked that the reason for the shortage of housing stock in Guildford, is down to property owners wanting to stay where they live because they like the area and most importantly, they want to benefit from the increasing value of their current home, rather than have to pay the relocation costs to move.

One example of an area where this has happened is the Fairlands Estate which comprises both houses and bungalows, built primarily in the 1960's. Fairlands is popular with an older population as many facilities are located on the door step. These include a parade of eight shops, a post office, a doctor's surgery, primary school, recreation ground and community centre. The area is situated away from more populated areas adjacent to farm land, but is still within a relatively short car or bus ride from Guildford town centre. 

Local shops on Fairlands Avenue

The bungalows were built with between 2 and 3 bedrooms but were quite cramped as many of the rooms, and especially the kitchen, were very small so they have been extended over the years to provide more living space to accommodate the many material goods that we now require to live in today's modern society. The Fairlands Estate is also a prime example of any area where many families have lived for many years so the accommodation has had to expand to accommodate them as they have grown.

Bungalows in Envis Way, one with a loft conversion

For example, some bungalows have been extended into the loft to provide room for a further one or two bedrooms and then part of a ground floor bedroom has been used to add more space to the kitchen.

One or two owners certainly must have had substantial dreams over previous Christmas and New Year holidays because they have removed the roof, built an additional floor and then constructed a new roof to convert their bungalow into a house. 

I have been asked by investors on a few occasions would it be financially beneficial to invest in a bungalow on this estate and then carry out these building works? How would this work affect the property value?

In Envis Way and Louis Fields, where most bungalows have been built on the Fairlands Estate, 2 bed bungalows have increased in value by 183%, from £199,500 to £364,950 in the last 15 years; 3 bed bungalows have increased by 145%, from £289,950 to £420,500; whereas the price of 4 bed bungalows  has increased by 200% from £224,950 to £449,500.

However those owners that have extended their bungalows from (say) a 2 bed to a 4 bed bungalow have seen their properties realise a 225% capital gain and those that have literally taken the roof off to convert a 2 bed bungalow into a 4 bed house would have benefited from a 276% gain as their property was worth £199,500 in 2000 but will sell today for £549,950.

If an investor had opted to rent their 2 bed bungalow out today for the market rental of £1,595 pcm they might achieve a 5.2% gross yield but an investor renting out a 4 bed house on the estate might only see only a 4.4% gross yield, if they manage a market rental of £2,000 p.c.m.

So if families had raised the roof in a previous New Year they would have been able to enjoy both a financial and lifestyle gain; but investors would have lost out, for the usual reason - Guildford offers great capital gains but poor gross yields.

If you would like to have a chat about property prices in Guildford or to discover where and how you can gain a greater return for your money in the bank call 01483 320207 or email richard@guildfordpropertyblog.co.uk