Renovated homes in demand as building costs skyrocket
The headlines declaring another building company is on the brink of collapse due to increased construction costs are becoming alarmingly regular across Australia in recent months.
And it's dissuading many homeowners from renovating, fearing spiralling building and labour costs or worse: handing over tens of thousands of dollars to a builder who goes under and takes the cash with them.
As a result, the idea of moving up the property ladder by purchasing a larger home that's a fixer-upper at a cheaper price is becoming increasingly unpalatable.
One consequence is that a premium is now being placed on homes that have been renovated within the past two years.
It doesn't matter whether you've added an extension, ripped up and replaced your bathroom or kitchen, or even put on a second-storey; you're going to find a lot of keen buyers.
In Australia, there has traditionally always been a buyer segment seeking homes in a rundown state at a discount price. But now, the volume of these buyers are dwindling. With cost and time blow-outs because of inflation, construction firms under pressure to stay within quoted costs, and the difficulty in finding skilled labour in a timely manner the previous appeal of renovating is starting to subside.
As an experienced agency, we understand why these buyers are now modifying their plans. We have seen all types of markets since starting Abode Peninsula back in 2010.
This current market presents a great opportunity for owners who invested in renovations before this post-pandemic perfect storm.
If you're interested in seeing whether this is the ideal moment to sell your home and begin a new chapter in your life, we'd be delighted to talk with you. The opportunity may well appeal to potential tree and sea-changers and those thinking it's time to downsize.
We can discuss the price trends and marketing initiatives that would maximise your sale price based on the current Mornington Peninsula property market.
Below, we've listed a few of the reasons why renovations and new builds are starting to have less appeal, to help you consider the opportunity.
Cost
Construction costs jumped 9% in the year to March, according to the latest figures from CoreLogic, the leading real estate research company. In the past five years, it says prices have leapt 25%.
Perfect storm
We haven't seen the building industry under this cost pressure for a long time. You have to go back to March 2001 when prices jumped 10.2% because of the impact of GST.
National snapshot
Rises in construction costs are evident across the country, says CoreLogic. Queensland (2.2%) recorded the lowest quarterly increase while South Australia (2.5%) was hit hardest. NSW, Victoria and Western Australia each recorded cost increases of 2.4% in line with the national average.
Labour shortage
It's common to hear complaints of builders struggling to find skilled and unskilled workers. With unemployment at 3.9% (the lowest since 1974) the problem isn't going to disappear quickly.
Rising interest rates
The Reserve Bank recently pushed rates up 0.5% to 0.85%. Now, fixed and variable mortgages are becoming more expensive. The challenge is compounded by first-home buyers and upsizers struggling to gain access to finance as banks proceed cautiously, predicting the cash rate will move as high as 3%.
This does not mean there will be no buyers looking for property to update and renovate, though we are seeing a slight decrease in what was previously a strong demographic. So, if you do have a newly renovated property and you are looking to for a change, make sure you get in touch with our team for a chat about the options available in the current market conditions on the Mornington Peninsula.
NOTE: The information in this article is general in nature and provided as a general overview only. Always consult your financial advisor or accountant for advice specific to your personal circumstances.
