People are renovating over buying a new home as the cost of moving becomes too much, according to renovators and property experts.
Reasons for this are being blamed on stamp duty and the current housing market conditions.
Renovation expert Dr Naomi Findlay said she expects a renovation boom as people are realising it is cheaper to renovate than move.
She said that people were “daunted” by dealing with such high costs when it came to moving. She discussed some of the reasons why renovation was so common and when to expect a change.
“Between agents, selling fees, between transactional conveyancing costs, stamp duties, in some situations that can be quite a substantial investment,” she said.
“With the 1980s housing boom that we saw in our country, all those properties are coming of renovation age. They’re really in need of renovation, so I don’t see the love and need of renovation wavering at all in the coming year.
“I think it’s that combination of the 80s housing boom as well people choosing to invest what would be a transactional cost back into their own investment.
“Unless something changes then it won’t change. Unless for example housing affordability or price points change dramatically then the transactional costs aren’t going to change. Or, unless the affordability of renovation changes, that behaviour’s not going to change either.”
Australian Broker also spoke to WBP group chairman Greville Pabst to delve further into the figures around what was causing people to reconsider buying a new home.
The leading property commentator said he had seen the trend of people renovating over buying for some time and also did not expect it to change any time soon.
Pabst gave the example of buying a $1million house. He said with stamp duty at five or six percent, the buyer is looking at $50k or $60k in stamp duty. The agent may add another 2% for commission, which is $20k. Then there may be legal costs or other costs involved which mean you are nearing $100k on top of the $1m for the house.
Pabst said: “I think many people are saying, well $100k just in transactions costs, I could get a new kitchen or a new bathroom or a renovation. What I’m seeing is more and more people doing that and staying at home and renovating rather than encounter those high transaction costs.
“The cost of borrowing money to do a renovation is the lowest it’s been for about 50 years. You can borrow money at less than 4%. So if you say 4%, you can basically do a one hundred thousand dollar renovation and it’s going to cost you $4k a year in interest. Most people spend that on coffees.”
He also blamed a ‘fear of missing out’, where families do not want to sell their home for fear of not being able to get back onto the property market due to a lack of quality family housing.
Additionally, the fact that more people are living at home with their parents for longer has a two-fold effect. It firstly means that there are fewer first home buyers, but also that people are renovating their current homes to accommodate their children, rather than moving.
Pabst finished: “I think it’s going to continue because it’s just simply easier and more affordable to do that rather than the alternative. I definitely see there’s a trend towards this.”