New figures from the Housing Industry Association predict an increase in renovations each year for at least the next four years, while lender CUA claims renovations have become a more popular reason for people to take out a loan than weddings, boats or holidays.
Analysis shows that more than one in 10 personal loans issued by CUA during the 12 months to 30 June 2015 were for home improvements or household goods, with renovators on average borrowing $15,000.
In comparison, just over 5% of personal loans were for holidays, with customers borrowing on average $10,000, while weddings accounted for less than 1% of new personal loans issued by CUA during the past year.
While the figures mean that more people might be spending their weekends with a hammer or tape measure in hand, renovating expert Cherie Barber has some words of caution for people before they decide to put in an extra bedroom or re-model their kitchen.
“I’d advise first time renovators to put in a lot of research or, even better, do some kind of formal course, to educate themselves about all the things that go into a successful, money-making renovation,” Barber said.
“I’d recommend they cut their teeth on a cosmetic renovation, rather than experimenting with an expensive structural renovation while they’re still learning the ropes,” she said.
For first-timers, Barber recommends simple projects such as painting, replacing blinds and curtain fittings and updating light fittings if it can be done with-out the need for an electrician.
Recent research that rental yields in Australia are decreasing may have something to do with the growing popularity of renovations, and Barber acknowledges there are some main areas where well-planned works can boost returns.
“I’m not a fan of carpets in rental properties. So where possible, I advise ripping up carpets if there’s floorboards underneath, and polishing up those. Otherwise consider a floating floor in either laminate or timber veneer,” she said.
“A full kitchen renovation can be very expensive and time consuming, whereas updating a few bits and pieces here and there can really modernise a dated kitchen…the same goes for your bathroom.
“Think new tapware, replacing the vanity or toilet if they’re worn and old, and maybe even new tiles.”
While some timely upgrades may help to boost rental returns, Barber said anybody considering full-scale renovations as a way to profit when buying and selling property needs to be careful.
“It’s never as simple as just buying at the lower end of the market, there are a whole lot of factors that come together to determine whether a purchase and a renovation are going to be profitable.
“If similar properties, un-renovated and renovated, are going for much the same price, that’s a big warning sign. It’s telling you that buyers don’t place a high value on renovated properties – and they’re not willing to pay a premium for it.
“In other suburbs, there may be loads of brand spanking new houses, and that’s what buyers are after; not renovated properties.
“Even when you find a suburb with good pricing disparity and demand for renovated properties, you have to pick up your ‘renovator’s delight’ at a price that leaves you a generous margin for profit.”
