Published : 18 May 2016
Australia’s passion for renovating is gaining even more momentum, according to the first of the Commonwealth Bank's Future Home Insights Series. Just published, the report predicts that Australians will spend $32 billion on alterations and additions in 2016 alone.
This equates to around 36 per cent of total spending on residential investment, according to Commonwealth Bank Global Markets Research.
This national love affair with home renovations means Australians may be more willing than ever to buy a property that can be improved, which could influence the price of un-renovated dwellings.
It's useful to compare CBA's report with the results of the Renovation Consumer Price Index, released by ServiceSeeking.com.au - an analysis of more than 52,000 quotes submitted by tradesman on the platform.
WA most expensive state
The report had good news for some states, and a mix of good and bad for others! Western Australia remains the most expensive State in which to renovate your home, even though prices have dropped by 4.07 per cent. Victoria remains the cheapest State, although prices have increased 0.63 per cent.
Those residing in New South Wales won't be happy, though. Increasing demand coupled with a shortage of skilled labour has seen the average cost of renovating a home in NSW increase by a shocking 8.11 per cent year on year!
Queensland remains consistent in renovation prices, and is the closest to the national average cost of $62.33 per hour.
If you are thinking of renovating, there are some key points to consider. And one of the most important is . . . don’t overcapitalise. It’s relatively cheap and easy to freshen up your home with new paint and carpet but, with major renovations, it's important to consider your return on investment. The cost of the renovation, added to the cost of purchasing the property, may not be reflected in the sale price.
Increase the value
The main reason for renovating is to increase the value of your equity. The paper profits that come from a bank re-evaluation of your renovated property, could help fund any negative cash flow, while also preventing costly maintenance in the future.
Before you renovate, do your homework. Have your property professionally valued, then compare it to other properties on the market in your area. Is there a substantial price difference in renovated properties? Go to open homes and check it out for yourself.
Don't immediately assume you must completely strip out kitchens and bathrooms and start again. With the renovation products available on the market today, it's relatively cheap and easy to simply replace bench tops, cupboard doors and tapware, and create a great new look for a fraction of the price.
And remember, always compare a range of quotes from builders and traders, and ensure you're comparing apples with apples. Then add an extra 20 per cent to 25 per cent contingency for the unforeseen expenses that will invariably crop up.