Renovating During 2020
The Commonwealth government’s HomeBuilder grant has many of us dreaming of a major renovation.
But if you’re considering putting serious money into redesigning, re-modelling or improving your home, what should you do to maximise your return on investment?
Renovation in the age of COVID-19
Australia is a nation of renovators. Data from HIA reveals that more than a third of the $101.659 billion spent on Australian residential construction over 2019 – or $36.261 billion – was spent on home renovations.
Now, with the Commonwealth government is actively encouraging people to renovate to help stimulate the economy, we expect to see a whole new wave of renovations.
The HomeBuilder scheme provides $25,000 towards the cost of “substantial renovations”. This includes carrying out major works on your principal place of residence, so long as construction costs are between $150,000 and $750,000 and your home is worth less than $1.5 million.
The grant also applies to knockdown rebuilds and off-the-plan purchases. But, unfortunately, it can’t be used on second homes or investment properties.
To qualify, you’ll need to jump through some hoops, including having an income less than $125,000 as an individual or $200,000 as a couple. You also need to sign a building contract between 4 June 2020 and 31 December 2020 and construction needs to begin within three months.
Helping first home buyers onto the property ladder
The good news for first home buyers is that they can apply for the $25,000 HomeBuilder as well as other grants and schemes for which they’re eligible. This includes the State Government’s First Home Owners Grant (worth $20,000 in regional Victoria) and Transfer Duty concessions, the Commonwealth’s First Home Loan Deposit Scheme and the First Home Super Saver Scheme.
This can add up to an extraordinary $45,000 to put toward the cost of a first home – and that’s without the transfer duty savings that could also apply.
For some perspective on what that could buy you here on the Surf Coast, read our interview with Olivia, a local first home buyer who bought land and built her own home in Torquay.
Renovations aren’t just about the money
Even with the help of the HomeBuilder grant, not all of us have the budget, or nerves, for a large scale renovation or new build costing $150,000-$750,000.
After all, everyone knows that renovating comes with unique challenges. These can range from practicalities such as finding the time to plan and organise it through to sorting out another place to live while the renovation takes place.
Then there are the problems you’re likely to encounter along the way.
According to design website Houzz, the top five challenges renovators face are:
- Finding the right service providers
- Finding the right products and materials
- Staying on budget
- Defining your style
- Funding or financing the project.
With this in mind, there’s a lot to consider before jumping headlong into a renovation and it pays to go into it with your eyes wide open, having done plenty of research.
Just researching the market?
Houzz’s data shows the kitchen is the most popular room to renovate. Next up is the living/lounge area, followed by bedrooms, then bathrooms and, finally, laundries.
The median kitchen renovation spend was close to $20,000, with the average bathroom renovation coming in at $8,000-$13,000. It is worth noting that none of these come close to qualifying for the HomeBuilder grant. You need to be doing something far more expansive.[blog_banner]
Getting the best return on your renovation investment
If you’re putting a lot of money into a renovation, you want to be confident you’ll recoup your investment and even eventually make money from it.
In fact, the most common question clients planning a renovation ask me is where to spend their renovation dollars to get the best return when they sell.
The answer I give is that it’s always important to consider your target market. In other words, who is most likely to buy your property and what kind of lifestyle are they looking for? This should guide you toward the form your renovation should take.
Because you can’t predict an individual buyer’s tastes, I advise that you keep any renovation simple. You should always stay sympathetic to the era of the home, and respectful of any architectural heritage. Choose neutral colours, clean modern lines, quality fixtures and fittings and nothing too unique or dramatic. Little things such as paying attention to functionality, light and aspect in the planning phase can go a long way to changing the feel of the home and eventually driving buyer interest.
It’s also important to remember that, while quality products and workmanship do matter, spending on extreme prestige or luxury items isn’t always a sensible choice. You’re unlikely to recoup the investment in a $20,000 oven or $5,000 tapware and over-investing in these things can be a fast way to lose money.
Renovating involves a cost benefit analysis
Renovating always comes down to a cost-benefit analysis. You want to think hard about where your money is going and keep abreast of the local property market to see what people will pay for. It’s also important to take a holistic approach, and take the whole house into account.
For example, many people simply assume that adding a bedroom will put that value straight back into their home. But if you’re sticking another bedroom on a home with a small footprint, one bathroom and a tiny living area, it’s unlikely to add any value at all. Instead, your money may be better spent adding a bathroom, turning one bedroom into a parents’ retreat or opening up more living space.
Leave that fourth bedroom for a more generous property with larger living areas and a bigger block of land.
If you’re looking to transform your home with a renovation, it can be a good idea to ask the advice of a local real estate agent.
I’d be happy to guide you in the right direction so that you understand what people are looking for and get the best value out of your renovation.