Perhaps you’re running out of space, or your home is looking and feeling a bit tired.
Is it time to renovate? Or should you sell up and move on? We take a look at the pros and cons of both, and the important factors to consider when making your decision.
Current market conditions
The Sydney property market finished the year strongly in 2020, with median house prices rising by 4.8% in the December quarter and units up by 0.2%. Alexandria recorded the single largest median house price increase of any Sydney suburb over the course of 2020 according to Domain, jumping 30.6% to $1.9 million.
The strong market conditions are continuing into 2021. According to CoreLogic, Sydney property prices increased 2.5% in February, adding tens of thousands of dollars to the value of some homes, and they are predicting a rise in market activity in March. Many experts are tipping the upward trend to continue as the year progresses.
With house prices rising, what can you do if your home is no longer meeting your needs?
Should you stay and renovate?
If there’s potential to add value to your property and you’ve owned it long enough to have built up equity, which will help you refinance, renovating can be a sound financial decision.
The first big factor to consider is location. If you love your local community, have an easy commute to work, and are close to good schools, renovating might be a good option. On the flip side, if you’re not completely happy with the area you’re in, no amount of renovating will change that.
However, the cost, time and sheer amount of work involved in renovating can be off-putting. Certainly, if you don’t see yourself staying in your home for at least another five years, renovating might not be worth the hassle and expense. There’s the cost of the building work, but there’s also design costs, engineering and consultants reports, and council fees to pay, and you might have to rent somewhere else to live while the work is carried out.
It’s important to take the condition of your home into account when making your decision. Old homes with hidden problems like rising damp, dodgy wiring or rotting joists can see additional, unexpected costs adding up. Factor in a decent contingency budget to avoid unexpected stress.
Timing is also a factor: do you need the extra space right now, or can you wait 12-18 months for a complete renovation to be complete?
Renovating a small turn-of-the-century inner city terrace often involves an expensive layout reconfiguration to create an open-plan living space at the rear, and that’s before you add any additional bedrooms. Sometimes, a small block size or heritage restrictions can make renovations simply unfeasible.
It’s also important not to overcapitalise. Will you recoup your investment when it comes time to sell?
To help you decide whether the cost of renovating will be a wise investment, get a professional valuation of your home. Then you can consider your property’s current value alongside the cost of renovating and an estimation of what your house could be worth after renovations to help decide whether renovating makes financial sense.
Or should you sell up and move?
If you’re not prepared to endure the stress and hassle of renovations, or if the renovation sums don’t add up, moving could be the way to go. Upgrading from an apartment or relocating to an area that better suits your current needs or future plans are common reasons for moving. Have a look at what’s on the market and get a valuation of your home as a start.
The changeover costs in buying and selling a property can be substantial, and the biggest cost most homebuyers in NSW face is stamp duty - in Sydney’s inner city and inner west it can range from $30,000 for a unit, through to over $100,000 for a large home.
That could soon change, however, with the State Government currently considering replacing upfront stamp duty on property transactions with a new property tax. The new tax could end up costing homebuyers less than the current stamp duty. The details are yet to be finalised, but the Government is hopeful the new tax could be introduced as early as mid-2021.
When compared with the expense and effort of renovating, moving could well be the more cost-effective way to avoid outgrowing a small property within five years.
Renovate to sell?
We routinely advise buyers on which improvements and alterations may provide them the best return on investment when it comes to renovations.
In the last two decades we’ve seen more and more buyers keen to make money by “flipping” properties. They buy a property in need of some love, undertake a renovation, and capitalise on a fast moving market to make a profit by selling as soon as the renovation is complete. While we have seen some fabulous results, and excellent transformations of properties over the years, it definitely pays to have experience, good trade contacts, a healthy budget, and intimate knowledge of the local property market before embarking on a reno to sell.
How to decide?
Ultimately, it’s a very personal decision. The key thing to consider is why you want to move or why you want to stay and renovate. Will it be easier, and cheaper, to buy a new home that fulfills all your needs, or to transform your current home into your dream house?
If you’re tossing up between moving or renovating in the inner city or inner west, we can help. Contact us today to arrange a valuation on your property.