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Value in Buildings

November 09, 2010

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As a prudent buyer or homeowner, it’s crucial you understand how the six layers of a building influence value. These six layers—Site, Structure, Skin, Services, Space Plan, and Stuff (the furnishings), as illustrated in the diagram, all impact a property’s value—both in the marketplace and as a real cost.

SITE—The value of a given property is determined by both the physical setting (Location! Location! Location!) and the legal definition of tenure status. The site, whose boundaries and context will outlast the lifespan of a building, is eternal and frequently accounts for a significant portion of real estate cost. With respect to tenure (ownership) status, the values attributed to freehold detached, semi-detached and row dwellings can all vary as they can for condominium, co-operative and co-ownership properties. Furthermore, the market value of a property will vary according to the rights accorded the individual to modify the site’s use. City zoning bylaws control what can be built including actual use, height, size, setback and design guidelines. One must weigh these factors before purchase.

STRUCTURE—The foundation and load-bearing elements are perilous and expensive to change, so people generally don’t change the structure. The structural life of a building ranges from thirty to three hundred years, but few buildings make it past fifty years because, like other consumer goods, we tend to believe obsolescence is inevitable in our production-oriented, “disposable” economy. Consumers are also limited by cost, requiring building to have a threshold of affordability, and structures built to last longer than fifty years are cost-prohibitive to most buyers. With the evolution and resurgence of mass-produced housing in this century, our concept of shelter has been reduced to a manufacturing programme, far different than our European urban centres, where buildings which are centuries old still stand.

SKIN—This is the face or cover of a structure. With the dramatic changes in both technology and the fashion of housing, exterior surfaces now change every twenty years. Recent attention to the energy efficiency of our homes has led to re-engineered skins that are air-tight and better insulated, with enormous strides in window construction, exterior siding and roof membranes. At the same time, buyer beware, for the recently installed vinyl siding and aluminum fascia on that cute cottage you’re looking at may be masking rotting wood underneath. Today, our quick fix approaches to prettying up our exteriors is also being compromised, resulting in a loss of character. Snap-in plastic gingerbread mouldings and E-Z-to-install siding may be low-maintenance for a while, but are no replacement for authentic architectural detail, fading quickly and making what was once beautifully quaint obtrusively ugly.

SERVICES—These are the working components of a building—electrical and communications wiring, plumbing, sprinkler system, HVAC (heating, ventilating, and air conditioning) and moving parts like elevators. These items generally become obsolete every seven to twenty years. Changes in services in recent history continue to modify buildings, including the arrival of public water services at the turn of the century, public gas and electricity beginning around 1910, cable television in the 1970s and now fibre optic and wireless communications. Many buildings are demolished early if outdated systems are not easily accessible, such as embedded water lines in poured concrete slab construction, like those found in many 1960s and 1970s Toronto high-rises.

SPACE PLAN—The interior layout, including the location of walls, ceilings and doors can change every ten years, and rarely last more than thirty. Changing lifestyles, household size and standards of living have influenced movements to larger bathrooms and kitchens, open concept living and dining areas, and the demand for fewer large rooms in a less formal setting are influencing the market value of traditional family dwellings, such that I predict a radical shift in housing values as our demographics change (age and household size).

STUFF—Well, we all have possessions in our home that speak volumes of who we are. Sofas, tables, lighting, cabinets, books and clothing all shift around our home environments daily to monthly. And our décor also changes as frequently, as paint and paper are reasonably economical ways to change the home environment. Of course, the dwelling that is perfectly presented will ultimately attract the buyer and perhaps enhance the value of the property but buyer beware, when the property sells and furniture goes the space, looking somewhat bleak will show all evident flaws requiring your own personal stamp. This is why vacant dwellings take longer to sell, as there is little reference for buyers to imagine themselves at home with no furnishings to visualize how the space may function.

What this means. Each property has a value unique to these six layers. The value of a site, influenced by location and the zoning controls associated with the property and those around it is critical. Take the time to approach the municipality to see what future growth is planned, as road-widening, parking restrictions or new proposed or pending developments may impact views or increase traffic congestion, all impacting future value.

Look closely at the structure of the building. A weak structure, impacted by age, dry rot and insect infestation can require thousands of dollars to correct. A solid brick house with a slight slope incurred over its hundred year life span may not seriously impact value if it appears stable and the property has character qualities difficult to find or replicate. And wood frame construction is not necessarily worth less than brick if in good shape, as its malleable construction can make renovations and additions more cost-effective, such as larger windows or space planning improvements like today’s preferred open concept styling.

When looking at the exterior and services of a dwelling, understand that all elements can have a limited life expectancy unless superior finishes have been used such as slate roof tiles. Like all condominium Reserve Funds (an excellent hidden value to this housing form if substantial), it’s an excellent idea to set aside a monthly allowance towards sudden repairs and future maintenance.

As for the space plan layout, the fashion of housing is constantly changing and, while good design and quality materials can be timeless, it is increasingly common for homeowners to prefer modifying their homes though their own initiative as a means of self-expression. With this in mind, it is important to remember that when renovating, you should either tailor it to suit your own needs without concern over return on investment or keep it simple so subsequent owners can adapt it to suit their needs. Frequently, the extent of renovations may depend on how long you plan on staying in your residence.

Why you should call us first? At urbaneer.com, our service includes illustrating how these six layers impact each property’s value, ensuring you can make a rational educated decision when buying your next home. We also encourage you to invest in the services of a reputable home inspection company that are trained to detect potential problems. Offering consumers insight and assistance in making rational and educated decisions about real estate, if you are thinking about buying or selling, call us for a pressure-free consultation that will quickly put the realities of today’s housing market in perspective. Offering savvy insight and expertise for 19 years in Toronto, we are your pro-urban housing specialists. Specializing in renovated and restored character dwellings, low-maintenance living, revenue-producing income properties, and loft conversions, call us now at 416-322-8000! Or check out our website at http://www.urbaneer.com for our current promotions, past newsletters and our Custom Housing Profile that help you identify your next move!

 

As a prudent buyer or homeowner, it’s crucial you understand how the
six layers of a building influence value. These six layers—Site,
Structure, Skin, Services, Space Plan, and Stuff (the furnishings), as
illustrated in the diagram, all impact a property’s value—both in the
marketplace and as a real cost

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