What to consider when you’ve outgrown your house and can’t decide to extend or sell
There are a number of reasons why you might outgrow your home, for example, you’ve had children, you’re working from home more, or another member of the family has moved in. Whatever the reason, you have a couple of choices: extend your home or sell it and buy something bigger. Which should you choose? The following are some of the things to consider.
1 Time
How quickly do you need to solve the issue of space? Or rather, how long can you tolerate living in your current space before it gets unbearable? Is the absence of a dedicated office causing a dining table takeover or buried under the clutter that comes with a growing family?
Putting an extension on your home is a massive undertaking that requires a building consent. By the time you get through the design and consenting process, you could easily be a further six or 12 months down the track depending on when your architect can start work on your project, and whether you need to obtain resource consent prior to your building consent. Then, subject to the complexity of the project and size of extension, it’ll be another four to six months for the build, and your builder might not be able to start right away.
In the best-case scenario, it will take 10 months to finish; for the worst case – 18-24 months. If you can’t wait that long, then selling up and buying something more suitable will solve your space issue a lot quicker – as long as you can find something you like for the available budget.
2 Cost
If you can overcome the time it takes, the next consideration is whether or not it’s feasible. How
much equity do you have in your existing property? To what extent do you need to refinance?
If you’ve owned your home for three to five-plus years, then chances are you’ve reaped the benefits of market growth and have the ability to refinance and pull some capital out to finance the project, or to upgrade to something else once sold. However, if you’ve only owned the property for a couple of years, there may not be as much equity in it due to property prices stagnating or potentially dropping this year. You’ll have to consider what that does to your budget.
With property prices stabilising and the cost of construction escalating, it’s possible that you might be financially better off to buy something else, but then comes the issue of supply and demand. Can you sell
your home for more than you paid for it and can you find something else to buy that meets your criteria?
In either scenario, rising interest rates might impact your serviceability if your mortgage is currently fixed at a lower rate than what you’d get on a new one or re-mortgage, so don’t forget to factor that into your calculations as well.
3 Supply
If you can’t bear the thought of parting with your current home, the next consideration when planning an extension is supply. With labour shortages and long lead times for materials, both cost and time will be affected if you decide to extend.
Some of your materials might be on a six-month delivery time frame, and even then that’s not a given. ETAs provided by suppliers at the time of ordering are consistently being pushed out by several more months, thus throwing out construction programmes for builders and their clients everywhere.
That is, of course, if you can find a builder. There was a shortage of people entering the trades prior to the global pandemic, and it’s only become worse with the construction boom. The impact of this is construction companies need to pay premium rates to attract and retain staff, with those costs being passed on to homeowners.
If you have a builder locked in, but are experiencing material delays, then there’s the decision of paying more, waiting longer or choosing an alternative material that potentially costs more in order to stay
on programme. Alternatively, do you stay the course and get delayed until your plasterboard and cladding turns up – or whatever it is that’s been held up.
Does that make selling your home and buying something else a more attractive solution?
4 Scope
The beauty of extending your home is that, subject to budget and consent conditions, you can get what you want. You’re in control of the layout, the finishes, the overall aesthetic. You have a blank canvas and you get to make it your own.
That’s not a luxury that comes with buying a house that already ticks the ‘is it big enough?’ box. It’s highly likely that no matter what you buy, there will be something that isn’t to your taste and therefore you’ll need to invest in some partial renovations.
Maybe the kitchen layout isn’t as functional, the bathroom is dated, the walls are tired and in need of
a repaint, and the curtains don’t block out enough light in the bedrooms. Whatever it is, you need to be prepared for that cost as well as the purchase price. Or, does it matter if you don’t have the budget to do that work right away?
5 Stress
After balancing out the time, cost, supply and scope parts of the decision, if you’ve landed on adding an extension to your home, the final consideration before locking in your answer should be stress. Can you handle it?
Renovations, especially large ones that involve an extension, take a long time, require a massive financial investment, need strict management and quick decision-making to avoid timeline overruns and budget blowouts. They will test most marriages and take up to two years.
If you’re already starting a new job, having a baby or undergoing any other kind of significant life event, then maybe now isn’t a good time to embark on a large project. Renovations are stressful, even if it’s possible to live in the house while it happens.
Projects come with collateral damage and builders won’t have a chance to fix things up easily. It’ll feel like it’s taking forever because you’re only seeing the daily progress and not the noticeable difference you’d see on a fortnightly site visit. Noisy construction works start as early as 7.30am, six days per week; they’re dusty and the whole process adds a layer of stress you probably don’t need on top of your regular commitments.
Moving out, of course, adds four to six months of rental cost on top of your mortgage – but your sanity is probably worth it.
Final thoughts
If you think you’re tough enough to take an extension project on, the only other thing you might be worried about is overcapitalising.
Know that the rule of thumb is that if you’re staying there for 8-10-plus years, you’re likely to see a return on your investment. Plus, if you’re going to live in the house for that long, you don’t want to regret not doing something for that whole time. So don’t cut corners.
Given the state of the market at the moment, I recommend chatting to a trusted local realtor before you do anything else. They’ll be able to give you an indication of value in today’s market – pre- and post-renovation and extension – as well as giving you some pointers on what future buyers might be looking for in a completed home so you can factor that into your project scope. Couple that feedback with a look at what larger properties are fetching at the moment, and you’ll be able to get a sense of whether there’s more value in staying put or moving. In most cases, the former is more feasible if you’re going to be there for more than five years.
Words by: Jen Jones
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