Renovating in 2021? Three things to consider before you start

A great renovation can add a huge amount to the value of your property, and financing one has never been cheaper with our current record-low interest rates.

But the most profitable renovation in the long term isn’t necessarily the most expensive tranche of works, said Scott O’Dell, national director of property valuation business Opteon Solutions.

“We always advise that the more you spend on a renovation does not necessarily correlate into a higher profit when the property is sold,” he said. “It is important to do research into the local market and understand the profile of your potential purchaser to make sure you’re spending your money wisely.”

Home offices are key 

COVID-19 has changed many of our tastes, O’Dell said. As we’ve now become so lifestyle-focused, we want homes that have been renovated to make good use of all the available space, as well as those that create a resort-like feel, with outdoor entertaining areas and pools.

“But following the pandemic, the working-from-home environment is always front and centre,” he said. “Home offices or studies are a crucial addition in any renovations, and they should be comfortable yet private spaces for those never-ending conference calls.”

There have never been so many affordable options for paying for renovations, either.

Many people who’ve worked through COVID now have savings from not spending on overseas travel, restaurant meals and entertainment. Others are considering redrawing their extra home loan repayments and either increasing their home loan or refinancing it to include the extra work.

Then there’s the possibility of a personal loan for renovations or even paying via credit card for the extra points – as long as it can then be repaid in time to avoid the high cost of interest payments. 

Cheap money

The best means of financing can be a matter of personal circumstance, and it’s recommended you get advice from your home loan provider.

“Money is so cheap now, it’s a good idea to lock in a fixed interest rate, with some still on a variable rate so you can pay off more,” said Marisa Broome, principal of financial planing firm wealthadvice and chair of the Financial Planning Association of Australia.  

“Then you can draw equity on your mortgage or you might have money in the offset account, which is the same as savings. But if you are considering a loan for renovations, it’s better to have that tied to the home loan, as that’ll be much cheaper than a personal loan.”

Renovations reap rewards

Buyers’ agent and president of The Real Estate Buyers Agents Association of Australia Cate Bakos said homes that were well-renovated were today commanding much higher prices than those that weren’t. 

“A lot of our buyers now are professionals and they’d rather stick to the white-collar work they’re good at than tradie work, and they don’t have the time to wait around for a reno or to supervise one,” she said. “Also, there’s a bit of a trade shortage now, and labour and material can be quite costly.

“So they’re looking at homes that have been renovated to include some kind of study – whether it’s created from a space under the stairwell, in a large bedroom where the Zoom camera isn’t pointed at the bed, or in an area in the living space.

“They’d also like a smart bathroom and kitchen, and open-plan is always a crowd-pleaser. Even inexpensive items like fresh paint, new carpet or good flooring goes a long way.”

Opteon research has found the number of people renovating is still increasing, with their projects also growing in scope, with many undertaking work well in excess of $150,000.     

“But you’re borrowing money at low interest rates, and property in Sydney alone is predicted to go up in price 17-18 per cent this year,” said Ms Broome. “So there should always be a good return on money spent.”