Reasons to be cheery
Posted in Industry NewsFor many Sydneysiders, the high cost and time-consuming nature of renovating a house are a topic almost as hotly debated as the hunt for a desirable school or affordable tapas bar.
But it seems the days of the $85-an-hour plumber, the elusive electrician and the unreliable plasterer are coming to an end.
A slowdown in the building industry, coupled with a strong dollar (making imported materials cheaper), should be good news for renovators, especially those considering a large-scale property makeover.
The state manager of Archicentre, Angus Kell, says that while the Federal Government’s First Home Owner Boost has kept the construction of new homes kicking over, the renovation market in Sydney is now quite flat.
“Of course, it’s not a uniform picture across Sydney,” Kell says. “The inner-city and inner-west areas seem to have remained quite busy but everywhere else – especially the Hills district and north shore – has gone off the boil.”
The managing director of Corben Architects, Philip Corben, urges renovators to take advantage of this temporary lull in building activity and submit their development applications (DAs) to their council.
“This is actually a great time to be building in Sydney,” he says. “The downturn means the good builders are more available and willing to tender.
“And there are responsive subbies [subcontractors]. The end result will be really well executed.”
For sale, with DA
Yet agents across Sydney – especially those with good proximity to the CBD – report strong demand for run-down properties in good streets.
Despite this growing confidence, many home owners are either unwilling or unable to commit the funds to transform “a renovator’s delight” into something more desirable.
An increasing number of properties are now advertised with existing DAs because the present owner cannot stump up the funds for the work.
An agent with McGrath Eastern Suburbs, Brendon Clark, says an existing DA is a useful marketing tool because not everyone has the time, patience or inclination to get involved in the development process.
“It means the buyer doesn’t have the headache of going to council and engaging architects to come up with the plan,” he says.
“If you’re a person who wants to get a foot in the property market, what better way than sourcing one that already has a DA in place? The turnaround time will be a lot better.”
Location, location
For people with young families, such as Yasmin and Alastair McArthur (see right), the choice of schools, access to public transport and proximity to work may be powerful factors in favour of renovating rather than selling.
“We actually bought the house after finding the school we wanted,” Yasmin says. “And with teenagers, you want them to have some independence, so the public transport situation was another important consideration for us.”
The McArthurs say that while they are spending more on their property than they anticipated, they are confident about the Sydney residential market’s long-term prospects.
The head of research and town planning group MacroPlan, Brian Haratsis, believes such optimism is justified, saying Sydney’s property market will benefit from growth in financial services and an influx of foreign executives.
“The financial sector is on the way back,” he says.
“Some 80 per cent of all high-level professionals in financial services are [based] in Sydney. As the sector comes back, the broader business services sector will follow – and they’re the ones who want to be close to the CBD.”
While we may never see property values soar as they did in the mid-‘90s, Haratsis says other Sydney-specific issues will continue to drive residential property prices: the lack of building land near the CBD, poor public transport infrastructure and strong population growth.
“In the next five years, we’re going to run out of land within that five-kilometre belt from the CBD,” he says.
“The other big thing for me is public transport. In the future, fewer people will be interested in driving their cars into Sydney.”
Strength of the inner suburbs
Given this scenario, it is not surprising property sales in Sydney’s inner city and the inner west have been strong during the past few months.
According to Australian Property Monitors, the median house price in the inner west rose 5.6 per cent in the September quarter, compared with 3.6 per cent for Sydney as a whole.
Some of the prices being paid are also taking local agencies by surprise. Many owners are taking advantage of the high prices and choosing to sell rather than improve their properties.
Agent Brendon Clark recently sold an unrenovated four-bedroom terrace in Redfern for $1.22 million, much to the delight of the vendor.
“We had three buyers fighting over it,” Clark says. “But the house was completely unrenovated. It needed a lot of TLC.”
The director of Laing+Simmons Surry Hills, Brett Ozanne, has just sold a dilapidated three-bedroom house on a 94 sq m block in Mary Street for $820,000 – $70,000 above the reserve – a week before its scheduled auction.
He sold a similar property up the hill in Davies Street recently for $891,000 – $150,000 above the reserve.
“The Surry Hills market has always attracted strong demand due to the shortage of quality stock coming on to the market, combined with the convenience of the location,” Ozanne says.
“There is an emerging market of upwardly mobile professionals who are looking for quality stock so they can upgrade to suit their needs.”
In fact, it seems many buyers (and a few investors) are deliberately targeting the most dilapidated properties, taking the opportunity of buying into a suburb perceived to be on the rise.
Further west, the principal of Taylors Real Estate Petersham, Robert Taylor, says he can’t keep up with demand for “unloved gems” and “renovator’s specials”.
“I just can’t get enough of them,” he says. “People prefer to ruin a house their own way rather than let someone else do it.
“Most people walk into a renovated place and say: ‘This looks fantastic but why did they do that?’
There is a good market for renovated properties but unrenovated ones have a much bigger drawcard.” Taylor says it’s not unusual to sell an unrenovated property for $1 million, provided it’s in a good street.
“People are doing well out of these properties,” he says. “But the secret is to take a long-term viewpoint rather than [looking for] a short-term gain. “Over that time, you’ll make money.”
Why renovate?
A chance to increase the value of your house.
You end up with a property that satisfies your needs.
You can stay within a familiar suburb.
Avoids the high cost of moving.
Saves time buying another house.
Avoids need to find new school/child care.
Relatively low cost of borrowing money. ...
Or sell instead
High cost and inconvenience of construction.
Effort required organising a DA.
Architectural and legal fees.
Uncertain housing market makes it harder to see a short-term return on investment.
Hidden costs.
Town planning, including heritage or other restrictions.
Cost of specialist reports and advice.
