Renovate or move?
Real estate prices have risen beyond the reach of many in recent years, although we are currently experiencing a softening or reprieve, which is consistent across the nation. For many, transaction costs are now prohibitive with buying and selling fees costing as much as a modest renovation in many cases. This state of limbo has caused a trend of people choosing to renovate their current homes instead of moving.
The logic is, if you are purchasing a home for $1million, the buyer has to add a further $100,000 for stamp duty, legal costs, agents commission and other charges, if they have to sell an existing property and so on. For that amount of money, there are a many significant improvements a home owner could do to their current home instead of buying a new one.
The cost of borrowing money to renovate is the lowest it has been for years. One can borrow money at around four per cent. Allowing home owners to accomplish a $100,000 renovation with it only costing them $4,000 a year in interest, which is what some people spend on coffee and cakes.
Another factor is that adult children are staying in the family home for a longer time these days than ever before. Younger people are travelling more and studying longer, which makes it harder to save money and move out of the family home, without generous help from the bank of mum and dad. Many parents are therefore choosing to renovate their homes to accommodate for their adult children sticking around for longer rather than downsizing.
At PropertyDuo we are hearing our clients say more frequently that they have a fear of missing out. Some families believe that if they sell, they might not be able to get back into the property market, due to the lack of alternate quality listings. It is quite evident today driving around the suburbs that the streets are full of tradesman and builders. Tradesman are in high demand which provides further evidence that there is a renovation boom going on! No matter whether you are searching for that dream property in a crowded market place or wondering whether a renovation will add value, obtaining independent advice from an independent property professional is paramount. The key is to know where to look, when to strike, how to negotiate before auction and to understand what a property is really worth.
The property market is always under constant change and at the moment we are seeing fewer homes on the market compared to previous years. I believe this is a trend we will continue to see, because right now, people perceive renovating more affordable than the alternative.