Real estate renovations: homeowners lumped with ‘Covid tax’ amid tradie, materials shortages

Property owners undertaking home improvements will have to pay a premium to complete projects following a surge in reno costs during lockdown.

Renovators will need deep pockets to complete projects this spring as lockdown fuels a home improvements frenzy that’s pushing up building prices and draining the supply of materials and tradies.

With families stuck at home and pumping money they would normally spend on travel and entertainment into their homes, there has been a surge in renovations, real estate data showed.

Roughly a third more homeowners were attempting extensions compared to a year ago, while bathroom and kitchen renovations were up 15 per cent, according to the Hipages research.

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Demand for homes with renovation potential also soared, with agents reporting so-called “renovator’s delights” were the most competitive properties to buy at auction.

The jump in projects has come amid a materials shortage and Covid-era disruptions to global supply chains.

This terrace in Darlinghurst sold after a renovation was abandoned for $1.68m.

Timber remains in particularly short supply due partly to the 2019 summer bush fires and prices recently had the biggest increase in 30 years.

Labour costs also ramped up, with tradies warning they’ve had a backlog of projects since lockdown restrictions started in June.

Builders, painters, concreters, tilers and garden maintenance workers were the most sought after tradies and had the biggest increase in requested jobs since July, Hipages revealed.

Alex Taskun, one of Sydney’s biggest plumbing operators, said the conditions amounted to a “Covid tax” for home renovators. “Tradies have to charge more,” he said.

This Bronte home was listed for nearly $6m before the renovation was completed.

To avoid the rising costs, some renovators have pulled the plug on their projects and sold incomplete homes. A Darlinghurst house recently sold midway through a renovation project for $1.68 million, while an owner in Bronte listed for nearly $6 million after failing to complete building works. There was a similar, recent sale in Waterloo.

Housing Industry Association economist Tim Reardon said the boom in renovations was a direct result of lockdown.

Increased time at home was prompting more people to reassess their living arrangements and improve their properties, he said.

“They are seeking more living space and they’re saving money like never before so they have more to spend on renovations,” he said.

First homebuyer Jeremy Smith is renovating a unit in Darlinghurst. Picture: Sam Ruttyn.

“The challenge is that it is harder to find a builder compared to a few years ago and costs are up. Renovating will cost more.”

Ray White chief economist Nerida Conisbee said rising home values were further encouraging renovators as it meant many families could tap into the increased equity in their homes for a makeover.

Price rises also spurred investors as it made it less risky to do a quick flip, Ms Conisbee said.

This trend was most evident in cheaper, outer suburbs, with Ray White data showing the suburbs with the most flipping activity included Carramar, Richmond and Bligh Park.

First homebuyer Jeremy Smith started a renovation after recently purchasing a unit in Darlinghurst and said buying a fixer upper was the only way he could get into the suburb.

“It was my dream to (buy) in Darlinghurst,” he said, adding that he was hoping to negate the higher renovating costs by doing a lot of the work himself.

Marni Crutchley and husband Will are currently renovating their Balmain house and said it was getting harder to find available tradies. “They’re getting busier and busier,” she said.