Mar 31, 2023
UK Homeowners Drop Six-Figures Renovating to Sell in Down Market
(Bloomberg) -- After buying a one-bedroom flat in north London for £440,000 ($537,000) in 2018 and sinking another £30,000 on redecorating over the years, Daria Danilina was hoping for a decent profit when she decided to sell last year.
But a rocky property market and rising interest rates suddenly made her dream of getting more than £500,000 impossible, and after a similar unit in her building sold for barely more than what she had originally paid, Daria realized she would need to do something radical just to make her money back.
While sellers are typically advised to make their properties as appealing as possible by touching up the paintwork and tidying the rooms, Danilina decided to take a bolder step. She hired a renovations company called Flyp, which spent £20,000 replacing the floors, redecorating, installing new light fittings and changing the furniture. It worked: A few months later, the property sold for £565,000.
“It’s such a win-win scenario — you as a seller get to sell quicker and for more money and the buyer can get a flat that you can instantly move into,” Danilina said.
She is one of a growing number of people who are turning to renovation firms and staging companies to help sell in a choppy market, one now suffering from lower house prices and slower sales. Flyp has grown rapidly as the market tightens. In 2022, they did 150 homes, but in the first quarter alone of this year they will have completed about 60.
The company has spent up to £150,000 at a time on revitalizing properties that aren’t moving: everything from putting in new kitchens and bathrooms to swapping out furniture. After recouping the costs of the work from the sale price, Flyp makes its cut by splitting the proceeds with the seller above an agreed-upon level. If the house is empty while it’s on the market, they’ll also put it up for short-term rent.
They say big renovations can make a difference in a slow market, with 80% of the homes they’ve worked on getting an offer within three weeks.
“We'll do full gutting — it’s not just staging, it’s anything needed to create value,” said Oliver Gershfield, co-founder of Flyp. He said that in a difficult market there’s a “flight to quality,” with buyers running from anything in a property “that will cause any nervousness. People will think, ‘Oh my God, I’m not touching this with a bargepole.’”
Estate agents agree that you want to help a property stand out in an uncertain market. “If you’re at a viewing and you’re kicking toys from under your feet, that can make a difference — you need to sell the aspiration of living in a property,” said James Stevenson, an area director at Foxtons.
There is also a practical reason for preferring a turnkey home right now: “A lot of buyers say they just want something they can move into,” said Jonathan Hopper, chief executive of Garrington, a property finder. “They don't have the cash going into a deal to do improvements.”
If sellers don’t want to go as far as full-scale renovations, another popular option is staging — doing lighter decorative touch-ups and renting furniture and accessories to make a property look more appealing. “I look at people and think: ‘You're not staging? Good luck selling your place,’” said Elaine Penhaul, director of Lemon and Lime Interiors, which offers the service.
Services include repainting, sprucing up gardens, changing carpets and lending furniture. Penhaul said a fresh pair of eyes can also be important for catching small DIY niggles that might be overlooked by owners. Recent jobs have included fixing a door that was damaged after a teenager punched it in a tantrum. “You don't see the little jobs if you’ve been in a house for a long time,” she said.
However, there is always a risk when investing money. “It’s a double-edged sword,” said Iwona Hovenko, a UK property equity research analyst at Bloomberg Intelligence. “Yes it increases appeal but with the cost of materials and labor where it is, especially in London where there’s a shortage of good tradespeople, there is the risk that you might not see the money back.”
Gershfield from Flyp said on occasion the company might not make a profit on a project, such as when a seller accepts a quick, low offer after the property is put back on the market. But costs are always recouped, whether from the sale or during the period when the home is rented out.
Hovenko added that inexpensive tweaks can therefore be less risky if you’re spending your own money. Something as simple as painting the doors in a kitchen can freshen up the appearance.
And smaller touches can still be rewarding. Penhaul of Lemon and Lime Interiors gives the example of a house she’d worked on that was valued at £900,000 by three separate agents. After £15,000 worth of redecoration and decluttering, it sold for £1.05 million in less than a week.
“You can’t just stick a place on the market and keep your fingers crossed,” she said.
The important thing is making your flat irresistible to potential buyers, Danilina concludes. “In London there are so many flats in very bad condition.” she said. “If the flat is ready to move in, beautiful, pleasing, then people will pay a very big premium for it.”
©2023 Bloomberg L.P.