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Get the measure of your new extension or you'll be waiting a long time for a buyer

Home improvements can give sellers the edge in today's tough market. But only if they're well thought out, writes Laura Howard

Homeowners still banking on the value of their house rising next year look like having their hopes dashed. Nationwide building society's 2008 forecast is for a fall in the annual rate of house price inflation from around 10 per cent to 0 per cent by this time next year. This means that, in real terms, property prices will also be falling as they will not keep up with inflation (currently 4.2 per cent, based on the retail price index).

An economic slowdown, tighter controls on mortgage lending and affordability problems for first-time buyers have combined to give the property market all the vibrancy of tumbleweed. Figures from the National Association of Estate Agents (NAEA) show that in October 2004, agents had an average of 511 buyers registered on their books. Last month they had just 282.

Peter Bolton-King, chief executive of the NAEA, says that agents are braced for stagnation, at best, over the next year. "Basically the market will be stripped back down to basic supply and demand," he says. "This means that flats, of which there's an oversupply in some areas, may fall in value but a village or a family home in the right area will rise."

The upshot is that homeowners can no longer sit back, do nothing and assume their bricks and mortar will climb in value.

"People have short-term memories," says Dean San- derson, managing director of Sanderson James estate agents in Manchester. "Because they have seen the value of their home increase [dramatically] for the last seven or eight years, they start to panic if prices aren't rising at the same rate – but price rises like this are over."

One way to break the shackles of a stagnant housing market and make your property more marketable is to carry out major building work. The recently published Halifax Home Improvement Survey shows that 58 per cent of homeowners have undertaken some form of work in the past 12 months – an increase of 12 per cent on last year's figures, when prices were still climbing. One in four homeowners in this group said they had work carried out specifically to add value to their home – an increase from just 7 per cent on the previous year.

A new kitchen was the improvement thought most likely to add value, followed by an extension, loft conversion and conservatory.

But, according to Mr Sanderson, home improvements can be a dangerous gamble. "You may not add as much value as you spend," he explains. "Even if you do, this value is only realised if you trade down or sell up and rent. [And if you are paying for the work with] borrowed money, that cash will have to be paid back – with interest."

Be warned, too, if you're tempted to get the "man down the road" to carry out major work. This can prove a false economy – as well as reducing the saleability of your home, warns Mr Sanderson. "Estate agents are bound by different rules than they were 10 years ago. With a loft conversion, for example, if a homeowner does not comply with legislation such as building regulations and planning permission, we will just have to call it a 'boarded loft' – not even storage space, as it won't be weight-bearing. Clearly, if people have spent £8,000 to £9,000 having it built, this is frustrating."

Sometimes, improvements can simply be ill thought out. Don't have a big conservatory built in a small garden that is not even facing the sun, says Mr Sanderson. You would do better in terms of the resale value to create an extra room elsewhere in the property.

And homeowners that take improvements literally into their own hands can actually reduce the value of the house. A DIY "arch", for example, in place of a wall between a kitchen and dining room, can knock off thousands if there is no proof it is structurally supported.

Some people go further still, says Mr Sanderson. "We once valued a property in which, in building their own loft conversion, the owners had removed the lateral restraints in the roof and put plasterboard there instead. Not only was the house unsaleable but the fire brigade had to be called in case the whole thing started to fall down."

But where home improvements are carried out by professionals, are proportionate to the property and surrounding area, and carry the necessary planning permission and paperwork, they can save money and stress, says Mr Fincham. "It's not just adding value that motivates people but creating space for the family – whether it's a new baby, a child returning from university who can't afford to buy, or elderly parents. After all, a home is something that we live in."

If you want to sell your home and are not planning major improvements, you will still need to pay extra attention to presentation in the current tighter market. "There is a lot more competition now to sell the same house, so buyers will have to put some work in," says Mr Bolton-King from the NAEA. "It's back to kerb appeal, which means a tidy garden and painted front door – and decluttering on the inside, showing as much floor space as possible."

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