Why Renovations Are The Next Big Thing In Sydney’s Eastern Suburbs
Renovations are on the increase in the eastern suburbs, and it’s little wonder why people are choosing this option.
We are starting to see a trend where people who have initially looked towards scaling up have had to change their minds, as they have been unable to find a home to purchase. Instead, they’re renovating their existing homes.
Due to the significant lack of stock on the market, there’s growing frustration among buyers who are facing up to the fact they are going to either have to stay where they are and renovate instead, sell and find alternative accommodation until their dream home comes up for sale, or pay more than they’d planned to get a suitable home.
Now, they’re turning their homes into the property they would have wanted to buy, by adding extra bedrooms and even extending. Small improvements go a long way in this area, including for future value, so it makes sense for some to opt for this method from an investment perspective as well.
In fact, we’re even seeing some buyers purchase recently renovated homes for a premium, even though they aren’t completely suitable for them. They’re then renovating the property again to turn it into the home they wanted. For sellers, this means there may be little point in renovating ahead of selling this season – so speak to your agent before starting to gut out the kitchen or you may end up spending unnecessary money.
This activity is likely to continue. The Housing Industry Association forecasts renovation activity to be on the rise for the next three years. As new home building slows down across New South Wales, the HIA’s State Outlook expects renovations will jump by 4.5% in 2016/2017, followed by 3.2% growth in 2017/2018 and 2.1% in 2018/2019.
As a result, tradespeople are becoming more expensive, ServiceSeeking statistics show. Building and renovation costs are up 8.4% over the year, compared to a 5.4% increase nationally, carpentry costs have increased 15.4% and plastering, painting, tiling and paving are also up substantially due to demand. But this increase in cost is outweighed by the significant fees payable when selling and buying real estate.
It’s highly likely that now property prices are so much more expensive, it makes sense for some home owners to save the money they would have paid on stamp duty and re-invest it into their current property instead. The cost of stamp duty on a $2 million house is close to $100,000 – which is more than half of the cost of a relatively basic extension.
Rather than giving this sum to the government, and paying to move and sell, it is clear that some eastern suburbs home owners are thinking about their homes as a blank canvas of opportunity instead. With the capital gains made on their homes over the past five years, there’s likely going to be plenty of refinancing activity to pull out that equity to improve their current home.
In the last week of August, there were about 30 Development Applications made to Randwick City Council, which includes everything from removing trees to complete demolitions and rebuilding of dwellings. Some of these included adding storeys, extensions and secondary dwellings.
We expect this to grow in future months.