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Renovation costs set to drop – what it means for home owners
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Australian homeowners and builders will see some welcome price relief in one area this year, at least – renovation costs are set to drop by up to 15% throughout the mid-year period. This little bonus does come with a few caveats, though. Today we check out what this means for both future home buyers and current home owners.
Why are renovations becoming cheaper?
The effects of the economic downturn, combined with falling oil prices, mean that the base materials like steel, cement and bricks for a renovation will come down in price.
There is also a fairly competitive jobs market at the moment, and tradespeople are comparatively easy to find. This is true for architects as well as general tradespeople. Construction jobs are being put on hold, and both self-employed and casually employed tradies are looking for jobs to fill the gap.
Beware of overcapitalisation
However, when it comes to renovations you can certainly have too much of a good thing. Despite falling renovation costs, it is actually very easy to overcapitalise on your home. Plan to renovate sooner in your home ownership cycle rather than later: Harley Dale, chief economist at the Housing Industry Association says that a wait of around 5 years is ideal for maximising your renovation returns.
Will bigger be better?
Steve Martin, president of the Real Estate Institute of NSW, has said that it is often easier to make a better return on smaller renovations than larger ones. Given that a major part of a home’s value is in its location, this makes sense. Of course, there are always exceptions to the rule!
Should I buy a house to take advantage of cheap renovation costs?
There is a complex web of financial factors that goes into the decision to buy a house. While the 5%-15% drop in renovation costs may be enough to tip the scales in favour of buying a home for some people, it shouldn’t really be a deciding factor.
However, mortgage brokers in Melbourne are advising people that the drop in renovation costs combined with the First Home Owners Grant Bonus of $13,000 (plus an extra $6,500 if you’re building in regional Victoria!) means that if you are planning to build, now is almost certainly the time to get the best return for the lowest investment.
building a home · buying a home · homeowners · renovations