Over the past year or so, we’ve all spent more time in our own homes than we probably would have otherwise. And, if there’s one thing that spending more time at home does, is highlight those opportunities for home improvement.
If you’ve been casting increasingly disdainful glances at your 20-year-old kitchen, finally reached the end of your tether regarding the lack of space or have convinced yourself that the outdoor area just isn’t complete without a deck, you’re not the only one.
At the time of writing, the most recent data from the Australian Bureau of Statistics (ABS) shows that $973.2m1 of alterations and additions to residential buildings were approved in one month (February 2021) alone – compare that to the same month in 2020 (pre-COVID-19 effects in Australia) and the same figure stood at $687.9m2.
Throughout the year, despite the uncertainty the COVID-19 pandemic has brought, people have invested more in their homes.
It's smart to focus on the areas that are high value in the eyes of buyers – kitchen, bathroom, an extra bedroom and street appeal.
Of course, if you’re considering a renovation, you need to understand why you’re doing it.
Many people renovate to sell their property at a profit – maybe it’s an investment property, maybe it’s their strategy to get the dream home.
If that’s the case, it’s smart to focus on the areas that are high value in the eyes of buyers — kitchen, bathroom, an extra bedroom and street appeal.
Improvements in these areas can be the difference between hitting your target sale price or missing out, so it’s worth considering investing in these areas, with a neutral, inoffensive interior. You may love a pink tile. Not many others will.
However, if you’re making improvements to your long-term home, focus on the areas that will make the biggest difference to how you use and enjoy the property.
For example, building that deck will mean you spend more time enjoying the outdoors — sitting outside on a warm summer’s evening watching the sun go down, cold rewarding drink in hand, is incredibly appealing.
You may need more space — perhaps the COVID-19 pandemic has resulted in more permanent working from home arrangements, or maybe the grandchildren are coming over to stay for a night (or four) more often than they were before.
Whatever the motivation, focus first on the improvements that will give you the most joy.
If you don’t already have a pool, it could be something that figures highly on your wish list — space permitting.
And, a pool is the perfect example of something that could significantly improve the way you use your property, without necessarily adding much value.
Research shows that nearly 40 per cent3 of people wouldn’t pay any more if a house had a pool, although almost 16 per cent would be happy to pay $10,000 more. Therefore, given that the average cost of a pool in Australia is around $50,000 – with many pools coming in over the $100,000 mark4 – it’s safe to say that a pool is a luxury addition, rather than a profitable one.
One addition that could save you some money, is solar. Australia has the highest uptake of solar globally, with 21 per cent of homes (2.66m)5 now taking full advantage of Australia’s sunshine.
Rooftop solar can cost anything between $3000 to $12,0006 on average, after taking advantage of the varying State Government rebates.
A common entry in the ‘against’ column for solar used to be the need to use the power in ‘real time’ — not much use if you’re out at work all day. However, with increasing numbers of people working from home, together with affordable battery storage becoming more readily available, solar is something that is certainly worth serious consideration. It could take less than six years to pay off — and then you’re literally saving money while the sun shines.
Renovations can be costly projects – in fact, half of the renovations in Australia are valued between $40,000 and $200,000. It’s serious business, so a pragmatic approach is needed.
How you proceed will depend on your circumstances. If money is not a driving factor then you’ll be guided by the additions that will most benefit your life. However, if you’re taking out finance to fund the renos, or you’re upgrading with half an eye on selling, it’s important not to over-capitalise, and end up owing more money than the property is worth.
And remember, renovations come with a lot of additional costs too – from architect fees and council permits to having to pay rent on another property if you need to move out when the renos are being done, it can soon rack up.
One way to reduce the financial load is to take on some of the DIY work yourself. And, if you’re an experienced DIY enthusiast, or a tradie by trade, it can be a smart move. However, It’s always good to remember not to overestimate your own abilities!
Even if you are doing work yourself, you’ll still need council approval for most renovations plus, any electrical work needs to be carried out by a licensed electrician.
Start by understanding the real reasons you want to reno, and then go for it!
If you're considering making a large investment, such as a home renovation, please contact us and we can see how it could affect your financial plan.