Insight

04.08.20  Renovating Tips

 

Is a Major Renovation Worth the Pain?

Aussies love a home reno.

In 2019, we collectively spent over $36 billion on residential renovations, according to figures from the Housing Industry Association (HIA).

While a good renovation can add significant value to your home or investment property, there are times that the pain of a major renovation might not be worth the pay-off. So it’s important to weigh up the potential value-add against the cost and hassle.

In recent years, there has been a growing trend toward renovating rather than upgrading or upsizing, with the high cost of property in Australia, and especially in Sydney’s eastern suburbs, causing many to stay put and improve their home instead.

When property prices are high, the potential changeover costs with stamp duty, moving costs and legal fees associated with buying and selling can mean it makes sense to stay put and renovate. On the other hand, when prices are flatter or falling, more sellers may take the opportunity to step up the property ladder. They may also try to close the gap further by renovating to add value before they sell.

What’s the value of renovating in today’s market?

How much value a major renovation can add to your home really depends on a number of individual factors, including your target audience, location, the scope of the development and how the work is done.

Great ways to add value with an eastern suburbs renovation include focusing on architecture, particularly if you live in Paddington and Woollahra. We’ve consistently found that the best renovations in the eastern suburbs have a strong and clear architectural or design focus to them. They have a ‘wow’ factor that makes them highly desirable to your target market when it comes time to sell. Successful renovations also have an emphasis on excellence and quality in all of the details, such as the fixtures and finishes.

Adding an extra bathroom to a terrace house is one example of a major renovation that can really pay off. The price difference between terrace listings with one versus two bathrooms can be as much as $100,000. That’s not to say it’s always down to the bathroom though - the whole package has to be right to entice a buyer.

A new kitchen can be another way to get bang for your buck if your current kitchen is looking outdated. According to Domain a kitchen update may cost as little as $10,000 but can add up to $50,000 to 60,000 value to your home.

What we are renovating and why

According to a 2019 study by Houzz on Australian Home Renovation trends, nearly half of renovators (49%) were renovating to add value. Kitchens were the most popular room to renovate, with a median spend of $20,000, followed by living rooms and bedrooms.

Half of the homeowners on Houzz renovated an average of three rooms per project, at an overall median spend of $20,000. Baby Boomers and Gen Xers combined were responsible for over three-quarters of renovation activity, spending an average of $21,000 and $23,000 respectively.

The major pain points

As many homeowners know all too well, a major renovation can be hugely stressful, with budgets frequently blowing out beyond what was anticipated. Houzz renovators found that the top three challenges were finding the right service providers (35%), finding the right products and material (34%) and staying on budget (32%).

Are you better off just selling?

Before you launch into renovating, establish what the cost and timeframe of the project will be – always adding in a buffer for unexpected costs – and then get an expert opinion on how much you can realistically expect the renovation to add to the value of the property in the current market. If the figures don’t really add up, factoring in your own time and labour, it may be that you’d be better off simply selling and focusing your attention on your new home.

But even if you decide not to renovate having an approved Development Application may have a positive impact on your property’s value. This will depend on whether or not there are many other sellers in your suburb who have similar plans in place. However, having a DA for an architectural renovation that significantly improves the design of the property can push it into a higher price bracket.

Can HomeBuilder help?

A new construction stimulus scheme from the Australian government, HomeBuilder provides eligible owner-occupiers, including first home buyers, with a grant of $25,000 to build a new home or substantially renovate an existing home. However, income caps, cost restrictions and restrictions on the value of the property apply. For example, the property needs to have a value of $1.5 million or below pre-renovation, which means many Eastern Suburbs properties wouldn’t be eligible. But it’s certainly worth investigating if you’re undertaking a large renovation and you can find out more here.

If you need advice on whether you should renovate or sell, don’t hesitate to get in touch with our team today.

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Eastern Suburbs Market Report

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