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Want to change the way you live but not sure whether to sell up and move or stay put and renovate? We examine the pros and cons of each option.
As your lifestyle changes or you simply outgrow your existing dwelling, a new home beckons. Yet the costs of buying, selling and moving house has forced many to consider renovating their current homes. To renovate or move; either option requires serious consideration.
Unlike the current property bubble, the home renovation boom is showing no sign of slowing down. The Australian Bureau of Statistics forecasts a 5% rise in renovation expenditure over 2003/04 to $19.6 billion. In fact, Australians are becoming more likely to spend disposable income on assets like their home, rather than travel or entertainment. And with house prices rising strongly around the country, adding value to your home is an investment that can yield sound financial benefits. Add to this the popularity of home makeover television shows, and it seems that renovating is Australia’s new national pastime.
Endless house hunting often leads to a disheartening revelation: your dream home is not on the market, not in your price range or simply doesn’t exist. Renovating offers homeowners the opportunity to satisfy their personal vision without the cost of building a new home from scratch.
And you can have your dream home without moving, uprooting the family and resettling into a different neighbourhood. You could also save money that would otherwise have been spent on house hunting and inspections, stamp duty, real estate commission fees and removalist costs.
When weighing up the costs of renovating versus moving, it is important to be realistic about what your home will be worth at the end the renovation to ensure you don’t overcapitalise. You can minimise the risk of overcapitalising with a bit of careful planning.
The first step is to get an independent valuation of your current home. Then research house sales in your immediate area to establish a benchmark price for a similar, renovated property. This will give you a fair indication of how much you should spend. As a rule of thumb, estate agents say renovations should cost between 20 and 30 per cent of the value of the property. Any more and you risk overcapitalising.
Next, draw up a renovation budget taking into account likely price rises over the one to two years it may take for planning and construction. Remember, the housing and renovation boom has created a shortage of tradespeople so plan ahead.
Get advice from real estate agents on what buyers in your area look for to determine which changes will add the most value. According to independent building assessors Archicentre, the most popular renovations in Australia are adding a new family room, a new bedroom and upgrading kitchen and bathrooms.
Your estimated budget should include all building material costs, architects fees (if using an architect), conveyancing and insurance.
A key consideration when thinking about a renovation is the time, energy and stress involved. This can vary considerably depending on whether your architect is project managing on your behalf or whether you are a hands-on owner builder. Chances are, at some point in the renovation you will have to deal with unreliable tradespeople, council regulations, legal issues, unexpected costs and day-to-day building issues. Moreover, renovations inevitably take longer than expected and cost more. According to the Housing Industry Association, the current demand for builders means completion times for home renovations are getting longer.
A final consideration is where to live during the renovation. Many people choose to move in with relatives or rent nearby. This is often the best option but can add thousands to the final cost. If you do choose to live on site, make sure you discuss any insurance and liability issues with the builder and your insurance company.
It can be tempting to regard moving as the easier option, forgetting that house hunting, dealing with real estate agents, buying and selling costs and the difficult process of re-settling all add to the emotional and financial toll.
When weighing up moving versus renovating ask yourself the following:
- How long do you plan to stay in your current location?
- Does the home/neighbourhood still suit your lifestyle and stage in life?
- If you have had or are planning to have children, is the home close to schools, shops and sporting facilities?
- Is your renovation going to be possible? (Local planning laws may prohibit or severely limit what you can do with your property.)
- How long are you prepared to wait for your dream home?
Given that the average cost of a home renovation in Australia has now reached $75,000 (HIA, Oct 2003), moving may be a cheaper option. This is particularly so for home owners in Sydney and Melbourne where average renovation costs have reached $100,000 to $150,000.
But if you’re yearning for change, don’t underestimate the effect of some simple home improvements. It’s amazing the difference you can make with a bit of new carpeting, tiling, painting, lighting, gardening, home-built storage space or even knocking down a wall or two. Or you could call in Backyard Blitz or Auction Squad!
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