May 17, 2017
New data has revealed that homeowners are increasingly taking out loans for renovations.
Mortgage Choice's latest Loan Purpose Report showed loans for renovation purposes rose 62.5% between April 2016 and April 2017.
“In April 2017, loans taken out by homeowners for renovations accounted for 5.2% of all loans written through Mortgage Choice – up from 3.2% in April 2016,” Mortgage Choice chief executive officer John Flavell said.
“This surge in the proportion of home owners choosing to stay and renovate their current property is not surprising.
“The cost of selling and buying a new home can be quite high depending on where you live, and this can outweigh the costs of a renovation.
“When you sell your property, there are a variety of costs you have to consider, including real estate agent fees, property marketing fees and removalist fees.
“Then, if you look to buy another property straight away, there is a raft of other expenses you will incur, including legal costs, pest and building inspections, loan fees and stamp duty to name but a few.
And while some of these costs are relatively small, Mr Flavell said other costs, like stamp duty, can be significant.
“Say you were to buy a median priced house in Sydney for $990,000, you would have to pay in excess of $40, 000 in stamp duty.
Stamp duty is a huge tax for New South Wales, with official figures recently showing that $1.98 billion in stamp duty poured into state government's coffers between January and March – $315 million more than this time last year.
“When you factor in the significant cost of stamp duty plus all the other costs that come with buying and selling property, it is little wonder why so many Australians are choosing to stay where they are and renovate their current home.”
Looking ahead, Mr Flavell said he expected to see a greater proportion of Australians renovating their current home rather than trying to sell and upgrade into a different property.
“Even when you strip out all the costs associated with buying and selling property, property prices continue to rise across many markets – specifically Sydney and Melbourne.
“As such, some home owners are finding it is cheaper to upgrade their current home through renovations rather than buy a bigger place.”
Mr Flavell said anyone thinking of renovating their home needs to take the time to do their research and make sure this is the right option for them.
“If you are going to renovate, planning is essential. Understand that it is not unusual for both costs and time to blow out when renovating property.
“Give yourself a financial buffer and make sure you know exactly what you are getting yourself in for.”