Revealed: The renovations that can add up to $400,000 to the value of a home

ANALYSIS: Some 40,000 people turned up at the Auckland Home Show earlier this month, eager to explore how they might renovate their homes.

Classic upgrades like adding an extra bathroom or bedroom are always popular. But how much value do these renovations really add? Property insights firm CoreLogic just released its new House Value Index, which offers a data-driven approach to estimating how much your house might go up in value if you renovate.

So, just how much does an extra bedroom or bathroom actually matter? Here are the three most common renovations, with how much value they add.

1. Adding an extra bedroom

Think about a standard three-bedroom house built in the 1980s. It might be spread over a 120sqm floorplan, with one bathroom.

One common renovation tactic is to add a fourth bedroom. This works by repurposing a spare dining room into that extra bedroom.

This tends to significantly increase the rental return of a property. But, according to CoreLogic’s data, the extra bedroom on its own doesn’t add that much value.

Adding a fourth bedroom to a 1980s house in West Auckland adds only $12,610 in value. In Dunedin and Manukau City, the number is lower. The additional value appears to be between $5151 (Manukau) and $6602 (Dunedin).

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There also appears to be a big difference between how you add the extra bedroom to the property.

Adding a bedroom within the current floor plan (e.g. repurposing a dining room) doesn’t seem to add that much value. But if you build it through an extension, that adds more value (and, of course, costs a lot more, too).

If your goal is primarily rental income, this might not matter to you. But if you care more about increasing a property’s value, this might be more important.

2. Adding an extra bathroom

Interestingly, adding a second bathroom adds nearly twice as much value as adding an extra bedroom. In Dunedin, an extra bathroom adds around $18,470 in value, while in West Auckland, it jumps to $24,785.

Of course, adding a bathroom is often more expensive than adding an extra bedroom. So this makes sense.

Bathrooms are ore valuable than bedrooms, according to the research. Photo / Getty Images

Though, these numbers are likely slightly undercooked. CoreLogic’s House Value Index assumes that the extra bathroom is the same standard as other properties, rather than brand new. Still, this gives renovators an idea of what to expect.

3. A full renovation

Now, let’s talk about a full-blown renovation. So let’s say you buy the three-bedroom home we’ve discussed so far. Then you add an extension and modernise it to 2020's standards.

CoreLogic’s data shows the value could increase up to $412,328 in Manukau and $355,817 in Dunedin.

It’s interesting to see the differences between Auckland and Dunedin. In some areas, additional bedrooms and bathrooms add more value than others. The bigger value gains tend to be in Auckland, where houses are also more expensive.

Opes Partners economist Ed McKnight: "The bigger value gains tend to be in Auckland, where houses are also more expensive." Photo / Fiona Goodall

You could spend the same amount on a renovation but perhaps get more bang for your buck in Auckland.

For example, adding an extra bedroom through an extension adds $108,837 in Manukau, $96,168 in Waitakere, but only $41,133 in Dunedin. Yet the renovation costs aren’t likely to be double in Auckland.

This is something we've never been able to prove until we've had this data.

- Ed McKnight is the resident economist at property investment company Opes Partners