Home Renovation: Why Aussies are Renovating Not Selling
Spring is typically all about selling homes, but the coming season is instead busy with home renovations. It seems that property owners are opting to renovate rather than sell, according to a new study. Aussie Home Loans surveyed 1,000 Australian homeowners and found that about 54% of homeowners are choosing to renovate instead of selling because of steep costs.
We dive deep into the study findings and determine why more homeowners plan to renovate, what this means for home loans, and what are the best practices when renovating or selling your property this spring.
Study: Aussies are Renovating Homes More Than Selling
In this latest study assessing homeowner decisions, it was found that rising interest rates are the main reason for the renovation trend. In fact, a whopping 73% of respondents decided to stay and invest in their current home instead of relocating because of the ongoing interest rate hikes.
And even though close to a third of those surveyed feel that they need a larger and more modern home, they felt that they could not afford to buy such a property in today’s climate.
The majority of those who decided to renovate plan to reside in the home (64%), with only 28% opting to sell the refurbished property. Only 9% of renovators are considering renting out their property.
Home ownership is as expensive as ever, which means more families are remaining in their existing properties for longer even though they’re no longer satisfied with their dwellings. Homeowners remain even if the home may be too small, or it may not have updated furnishings and interiors.
Selling is less of an option these days because clients prefer to build on their existing equity rather than facilitate selling and buying again in the same market. For many, it is not worth the stamp duty costs and agent fees involved in the process.
Real estate experts note that spring will look different than previous years because there will be less homes put up for sale. Changing economic circumstances, rising rates, and tightening household budgets impact the spring selling season.
How Are These Renovations Financed?
As regards funding, there are two main sources of renovation money that homeowners plan to access: one is to refinance the current home loan, and the other is to dip into savings in the home loan offset account.
Homeowners who plan to refinance plan to push the Loan to Value Ratio (LVR) to either 80-85% to 90%. They will be using existing equity that they’ve already built from years of paying off the mortgage.
Meanwhile, those who plan to use savings understand that doing so will impact the repayments more – as the money sitting in the offset account will be decreased.
Are these moves worth the cost? The research shows that property owners are willing to push higher on the LVR bracket, use their savings from the offset, or even pay LMI to be able to renovate their current homes. It shows that Australians are willing to incur risk to improve their current dwelling and have a home where they can remain longer.
Talk to a Mortgage Broker About Home Renovation Financing
Home renovations may also need the expertise of mortgage brokers. They are the go-to professionals to source the appropriate financing for property owners.
There are different scenarios when renovating, and a broker can help navigate things. For example, a smaller renovation (e.g., kitchen) may require loan restructuring that lets you stay with the current lender but free up a few thousand dollars cash. A larger scale renovation, meanwhile, may require a construction loan to be pulled off. Homeowners who want flexible access to funds can consider an offset or redraw, and those who plan to refinance can find the support and knowledge of multiple lenders offers.
Brokers could support renovators by estimating costs of construction and valuation of the home, presenting renovation vs. relocation options, and streamlining refinancing or current home loan restructuring, whichever the client needs.
If you’re thinking about renovating your home, feel free to consult with Intellichoice loan professionals. We’ll help navigate loan refinance terms and lay out options on how you can spend in the most efficient way even amidst rising costs. Let’s talk today!
