By Herron Todd White
With the Australian economy continuing to suffer the effects of the coronavirus pandemic, the number of property transactions has decreased substantially in the last several weeks. In spite of this, there are still many examples of desirable properties that “tick all the boxes” still achieving healthy sale prices – in line with pre-pandemic conditions. Conversely, substandard properties with any issues appear to be remaining on the market for extended periods.
On a more positive note, we have recently seen restrictions on open for inspections and auctions loosened, which may assist in improving market sentiment and help alleviate the high number of listings expected to come through as we move towards spring.
This month we are looking at the topic of renovations, particularly in the context of the current economic downturn.
Inner and Outer North Property Update
Given that Inner North suburbs tend to comprise older dwellings, at least relative to the outer north, it is within these suburbs – including Coburg, Reservoir and out to Greensborough and Bundoora that we are most likely to see homes undergoing renovations.
Older homes, often held in families for many years and kept in their original state will often undergo impressive modifications and upgrades once sold to owner occupiers looking to make their homes larger, modern, comfortable and better suited to modern life.
Renovators can often expect to see healthy capital growth as a result of these renovations bringing these properties up to meet the expectations of potential purchasers for these areas
There are a number of areas in the Inner North where ‘pop up’ rear extensions to existing heritage facades are becoming more commonplace as a means of meeting the requirements of heritage protections. We have seen numerous examples of these, where older homes with small and enclosed living areas have been opened up, increasing natural light and utilizing spaces in a more functional way.
In recent months as a result of the Coronavirus pandemic, we have noted that the occurrence of larger renovations and extensions has reduced, bucking the trend of the past several years where renovations have been commonplace, particularly as a result of gentrification in many areas and a large number of homes constructed in the 1980’s becoming more obvious candidates for modernisation. Prime examples of this can be seen in Reservoir and Montmorency where homes with renovation potential can be purchased for between $700,000 and $850,000 and $800,000 to$900,000 respectively. Once fully renovated, we are seeing homes in Reservoir achieve $1.1 million to $1.3 million and Montmorency, $1.1 million to $1.4 million.
Investors in the outer north suburbs, looking to attract tenants or sell are more likely to carry out more modest or cosmetic renovations for ‘easy wins’, partly as a result of homes in these areas being much younger, with layouts not differing too much from new homes being constructed today. Minor renovations in these areas will tend to be limited to painting, replacing floor coverings, and perhaps a new kitchen, bathroom or deck.
Moving forward, we expect that the prevalence of major renovations will continue to remain in parity with the economy and if this continues to deteriorate, then it is reasonable to expect that renovators will become less willing to spend big.
Inner & Outer South East Property Update
With many of us bound in our homes and adapting to the new ways of life, we have seen building applications have hit an all-time high in homes within Melbourne’s southeast. Many homeowners and investors are utilising this time to work on home improvements. With the Reserve Bank’s decision to cut rates down to a low of 0.25 per cent, this means it is cheaper than ever for homeowners and investors to borrow money to make improvements. In established areas of the South East, we have seen suburbs including Hughesdale, Parkdale and Carnegie undergo renovations.
Renovations works can range between $80,000 all the way to $300,000 for higher quality specifications. Renovators are also sourcing their own materials and doing DIY jobs in order to keep costs down.
Home improvements are more apparent in older homes, where owners are likely to undertake minor works or ‘gut out’ their entire home to install new finishes, appliances, fixtures and fittings while still maintaining the foundation and frames of the original dwelling. The results usually speak for themselves, with increasing numbers of homes becoming more spacious, modern and customised to the owner’s lifestyle.
Renovators and investors are choosing to renovate their homes for a number of reasons; one might to improve their current home to suit their lifestyle, others are renovating so they can sell it quicker and at a higher price in this current market which can yield great results.
Eastern Suburbs Property Update
In the Eastern suburbs of Melbourne, the number of renovation jobs completed by Herron Todd White has increased.
The outer eastern ring has seen a spike in renovation valuations. Suburbs such as Kilsyth, Blackburn, Doncaster and Wantirna have had measured growth in jobs for renovations. Ranging from complete renovations, partial renovations and additional spaces being created to the homes. The trend we are seeing, based on the ownership information provided by third party web service, Core Logic, is that it is mostly current owners who are renovating. Whether it is cabin fever or having a surplus of free time due to being isolated is speculative. What we do know is that there has been a significant increase in renovations being undertaken.
Due to the eastern suburbs being an established, older area with a range of Italianette, Victorian, Edwardian and Art Deco homes, the opportunity for renovation is a lot higher than suburbs in developing areas. In some cases, it is almost more expensive to renovate an old home with structural issues than building a new dwelling. Though, due to the aforementioned style of homes being omnipresent in the Eastern suburbs, there are more restrictions for what is able to be renovated and planning approval can be more difficult and time consuming to attain. Buildings that are heritage listed and suburbs with heritage overlay encumbrances can encounter obstacles when wanting to extend and renovate. Largely because most heritage buildings require the front facade to structurally remain the same and there be no visibility of additional levels added to the home from the street frontage. This can greatly escalate building and labour costs.
Depending on how far East you travel to buy a home with renovation potential, the outer East would have houses available with a purchase price of $700,000 and $1.2 million. A big trend seen in Glen Waverley and Mount Waverley is for buyers to purchase run down properties and build a new home with four or five bedrooms. While this isn’t a renovation, it is an interesting trend seen over the last couple of years.
The effect of COVID-19 hasn’t slowed down the construction industry completely. There are still many investors who are eager to build and develop even through this uncertain time. We are seeing basic renovations begin at prices around $150,000 to $200,000 and more substantial renovations priced around $400,000-$500,000. Sub-contractors and trades are in hot demand and renovations are definitely sought after during this period of isolation.
Western Suburbs Property Update
During these unprecedented times we’re seeing a concentration on the concept of improving your home or investment through renovation projects.
Some areas in Melbourne’s West that Herron Todd White has seen a jump in renovation ‘As If Complete’ reports is the inner Williamstown and Newport region.
Williamstown and Newport are much older and more established regions than most of Melbourne’s West which consists of newly developed housing estates. Because of this, older dwellings within these more established regions are far more likely to conduct a renovation or extension project due to owners wanting to revamp the older styled dwellings.
Renovations can be a costly process which can fluctuate in price due to a number of reasons. The scale of the renovation, materials used and chosen builder all play a massive part into how much a project might cost. Homeowners within Williamstown in general have a much higher household income compared to homeowners living within Melbourne’s Western growth corridors and therefore they are able to put more money toward larger scaled and higher quality renovations. This can be anywhere from $100,000 to $600,000 depending on the works being done.
Housing within Wyndham and Melton in general are new to near new dwellings having only been built within the past five years. Because of this, the need from renovations and extensions are not as rife compared to that of the older and more established regions that have been around for decades. Smaller scaled housing projects such as pergolas, working sheds and landscaping is a common trend for home owners within these newly developed housing estates as it simply isn’t necessary for them to upgrade or extend on their newly constructed homes. Another factor is the size of the land generally being smaller in these high density urban growth zones and therefore there is an inability to extend any further on the dwelling that already takes up the majority of space on the land.
Speak with a Melbourne Mortgage Broker today.
DISCLAIMER: The information contained in this article is correct at the time of publishing and is subject to change. It is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, Smartline recommends that you consider whether it is appropriate for your circumstances. Smartline recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.