Four in five first-home buyers turning to unrenovated homes amid rising prices, survey shows

First-home buyers are turning to dated properties in need of a renovation, as rapidly rising prices push them to compromise to get onto the property ladder.

More than half of Australians buying their first home intend to renovate it within a year, a new survey shows, with one in five planning to renovate immediately after buying.

A further 23 per cent would undertake a renovation within five years, according to a recent survey by comparison website Finder.

Skyrocketing property prices have instilled a fear of missing out among first-home buyers, with many looking to make compromises to get into the market sooner rather than later, said Sarah Megginson, Finder’s senior home loans editor.

“In a hot market, it’s not always possible to buy your ideal home, let alone your dream home,” she said. “What some first-home buyers are finding is that their best chance to get on the property ladder is by purchasing a ‘fixer-upper’ in a suitable suburb.”

City dwellers (82 per cent) were more likely to buy with plans to renovate than their regional peers (75 per cent), while NSW first-home buyers (84 per cent) were more likely to renovate than their counterparts in Victoria (77 per cent) and Queensland (75 per cent). More than half of NSW first-home buyers intended to tackle a renovation with a year of purchasing.

“Property prices are so much higher in NSW, so you have to be willing to negotiate and compromise a little bit more,” Ms Megginson said.

The survey also found investors (85 per cent) were more likely than owner-occupiers (79 per cent) to renovate, and men (85 per cent) were more intent on renovating than women (74 per cent).

While many first-home buyers intend to renovate shortly after securing a home, rising property prices and strong demand for trades – off the back of the HomeBuilder renovation boom – could make this hard to achieve. Then there are the delays that naturally come with any project, Ms Megginson said, meaning it could take first-home buyers longer than intended to tackle a renovation.

Australians spent an average of $63,118 per renovation project last year, with kitchens, bathrooms and outdoor areas being the top projects of choice.

First-home buyers in Sydney are increasingly expanding property searches to more affordable locations, and smaller and older homes, said Michelle May, principal of Michelle May Buyers Agents.

“If they’re not looking at properties that need a renovation – cosmetic or more substantial – they are really hurting their potential to get on the property ladder … and cutting out quite possibly more than half of the supply available in their price range,” Ms May said.

Apartments in small redbrick blocks from the 1960s and 1970s were popular among first-home buyers, who had become wary of newer apartments due to issues at the troubled Opal Tower and Mascot Towers in recent years, Ms May said.

For first-home owners Gemma Cardelli and Rob Vukovic, buying an old apartment was their best chance of getting into the inner-west market using the First Home Loan Deposit Scheme, which allows first-home buyers to buy a home worth up to $700,000 with as little as 5 per cent deposit.

“We were after something we could do up a lot or a little,” Ms Cardelli said. “Because the market is so high we knew this would probably be the only opportunity to get something that could be great after some work.”

After buying a two-bedroom Croydon apartment for $635,000 last year, with the help of Ms May, the pair spent about $30,000 and three months carrying out the bulk of renovations, redoing the dated bathroom and kitchen and upgrading finishes before moving in.

“We spent every weekend there with Rob’s dad [who is a carpenter] leading us,’ Ms Cardelli said. “It was intense and stressful. The only way to do it is with the support of family.”

While the renovations took longer than expected, it was worth it, Ms Cardelli said.

“Now we have basically a brand new apartment. It’s beautiful, and [renovating] gives you an opportunity to have something you wouldn’t be able to buy.”

Ms May warned first-home buyers not to bite off more than they could chew, with many overestimating their DIY skills and underestimating the cost and time involved in a renovation – and said the wait on trades had blown out in recent months. She noted strong demand for fixer-uppers meant they were rarely the bargains people hoped for.

“Work out how much it is really going to cost and then add 10 to 20 per cent, because you’ll likely go over budget,” Ms May said.

Buyers in Melbourne were also increasingly turning to fixer-uppers, after repeatedly missing out on new or renovated properties, buyer’s agent Wendy Chamberlain, of Chamberlain Property Advocates, said.

“The market is just running away and with interest rates where they are, if you’re trying to save more to catch up you just can’t at the moment,” Ms Chamberlain said.

“First-home buyers are prepared to compromise on brand new and perfectly updated interiors of a home, knowing at least they can ride the uplift in prices if they get in with an unrenovated property now.”

With the exception of young tradesmen, most first-home buyers did not have the cash, the skillset or time to pull of a sizeable renovation after purchasing, and should be prepared to do bits and pieces over time, Ms Chamberlain said.