Renovation first choice after rate rises dash selling hopes

Spring is a time of new beginnings, but homeowners are choosing to renovate rather than sell after a dozen rate rises dashed their hoped of selling.

Homeowners are choosing to renovate than sell, according to a new survey by mortgage brokerage, Aussie Home Loans.

More than half of homeowners who are planning a change this spring are turning to renovations because they cannot afford the extra expenses of selling and buying, despite the challenges of securing a tradesperson.

A survey by mortgage brokerage Aussie Home Loans found 54 per cent of property owners looking to renovate in the coming months were doing so ­because they could not afford to buy a new home.

Almost three-quarters of these homeowners cited rising interest rates as the reason for turning to renovations.

“When you consider the commission you’re paying the agent, what your transfer fees are, what your stamp duty fees are, when you put that into a bucket you get a pretty nice renovation,” Sebastian Watkins, chief operating officer of Lendi, the parent company of Aussie Home Loans, said.

“Upgrading and spending another $400,000 to $600,000 to get that extra room, compared to three years ago, that is a pretty expensive decision at 6 per cent interest.”

The findings come as homeowners await the Tuesday meeting of the Reserve Bank board, which will decide if mortgage rates remain on hold for a third month in a row or rise for the 13th time since April last year.

The length of time homeowners are spending in one place has been growing over the past decade, blowing out from 9.3 to 13.5 years.

For those who bought ahead of the pandemic, the equity in their homes would have grown significantly, with some areas of Australia experiencing increases of more than 30 per cent.

After modest declines through the second half of 2022, prices are again on the rise.

August secured the eighth consecutive month of gains led by improved conditions in Sydney.

Three of the country’s three capitals cities – Brisbane, Adelaide, and Perth – are also reporting new all-time highs.

One in four homeowners said they would be refinancing to draw from their home’s equity or their redraw accounts in order to get the job done.

While conditions are starting to improve in the construction sector as the industry works through the remainder of its Covid pipelines and material shortages, Urban Development Institute of Australia president Max Shifman said it would still take some time for the industry to return to normal.

“I wouldn’t say it’s necessarily easy to find traders of any kind, really, yet,” Mr Shifman said.

“We’re not facing the same crunch on labour supply that we were a while ago … (they’re) still pretty busy finishing a big amount of housing that was started through the latter part of the pandemic.”

It would likely become easier to find a tradie next year, Mr Shifman said.

The number of new homes being built had fallen to decade lows, which should free workers up to work on established homes.

Mr Watkins said a revamped bathroom and kitchen also had the added benefit of helping to boost a home’s value.

“The conversation with these people is actually not about how much can I save, but how much equity can I unlock without it increasing my monthly expenditure,” he said.