With more time being spent at home, Sydney investors are looking to up the ante by undertaking a number of renovations in order to add greater value.
Herron Todd White’s latest research delves into renovation activity across Australia.
According to the research, the downtime delivered by isolation “has spurned on owners looking to improve their assets through maintenance and upgrade”. Similarly, anyone with the financial means who’s keen on more substantial renovation will find willing trades and suppliers hoping to quote, it said.
“Renovation is a popular option in many parts of Sydney, particularly in inner Sydney and harbourside locations where extension and renovation of an existing home is a more viable option than a [knockdown] and rebuild,” Herron Todd White noted.
“These areas often have heritage and other planning restrictions that make it difficult to get approval to do a complete rebuild. In addition, it is also desirable to maintain the period features of older dwellings whilst upgrading the fit-out and increasing the floor space.”
Certain areas within the harbour city are proving to be more prone to renovation activity.
“In the middle and outer rings, there is more of an appetite for [knockdown] and rebuild, increasingly for duplex and small [townhouse-style] developments to take advantage of larger land parcels,” the research noted.
“Granny flat builds continue to be a popular option in these areas too, either for extended families or for those looking to obtain some additional rental income. This doesn’t mean that renovations aren’t an option here, as owners look to enhance their homes by something as minor [as fresh paint] or some additional landscaping, through to a [full-blown second-floor] addition and full renovation.”
An increased focus
The pick-up in renovation activity is unlikely to slow down, according to Herron Todd White.
“One of the reasons we anticipate minor renovations to be evident in the [short-term] is due to people being [locked up] at home and looking for constructive projects to complete around the house which will serve many purposes such as increasing the presentation of their homes and also providing [much-needed] stimulation throughout this lockdown period,” it said.
“This could partially explain the continued demand and long queues at Bunnings Warehouse over recent weekends. Even larger renovation projects have continued to be evident as owner-occupiers look to improve the value of their properties and engage builders and tradesmen at potentially reduced costs, at least in comparison to recent years.”
A slowing construction sector, low-interest rates and lack of supply in many locations and sectors are likely to encourage renovation projects in the near future, the agency added.
“Investment properties such as [older-style] home units are also likely to see continued renovations as potential tenants are provided with greater choice at reduced asking rents,” it said.
“It will be imperative that investment properties are presented in the best possible condition, otherwise tenants will quickly choose a competing property in superior condition or alternatively demand a discounted rental price for any [subpar] properties.”
While many Australians are increasingly looking to renovate their homes, it’s important to consider various factors before doing so, Herron Todd White advised.
“When renovating it is essential to understand the main goals for doing so, whether that be to sell, rent, or purely to renovate to personal taste to live in [long-term] regardless of how this appeals to the local market,” the research report said.
“A few significant aspects to consider when deciding to renovate are in relation to possible heritage restrictions, planning limitations, site access and the scope of works being carried out.
“We hear of many renovation success stories, however a significant part of this requires understanding the intended personal objectives of renovating a property and if renovating with the aim of selling for a profit, then timing of the market cycle (which can involve some level of luck) is important.
“Some other techniques to ensure renovations are not overcapitalising is by focusing on what the local market desires most, researching recent sales of similar properties (on completion of the renovations) and then ensuring the cost to do the chosen works does not blow out your budget or exceed the market value of the finished product.”