Recession renovating

recession-proof renovatingA nasty old recession might frighten us into worrying about losing jobs or cancelling extravagant holidays but spending more time at home will prompt us to take out the tools and renovate – albeit with a dash of DIY and budget-consciousness.

“The doom and gloom of the recession will be counter-balanced by the so-called Nesting Effect,” says Housing Industry Association chief economist Harley Dale. “While people will be worried about their jobs, they will spend the weekend fixing up the house and heading to the hardware store.

Better value ideas

Experts are predicting we will do smaller renovation jobs such as installing a new kitchen ourself or building a deck rather than take on a major renovation and extension.

“The $100,000 to $300,000 renovations still happen, but not like they used to,” says Mark Mercer, general manager of Spinners Home Renovators and Maintenance.

“We’re seeing people do the renovation masterplan but maybe spend only $25,000 doing up the bathroom rather than the whole job.”

Domayne Bathrooms and Design Renovations – a full service bathroom builder and retail outlet – say times are definitely tough for the mid to top end of the home renovation market.

“The total dollar value of renovations has come back, but people want more for their money,” says Domayne franchisee Len Nucifora.

“Clients don’t want to sacrifice the look of their renovation so we work hard to deliver the quality but save them around 25 per cent.”

Nucifora says tricks like using cheaper white tiles, glass benchtops instead of Caesarstone and polyurethane instead of timber are helping slash costs for high end bathroom renovations and keep the business ticking over.

Even better, the price of tradespeople and labour has come down since the beginning of 2009 – with Nucifora saying plumbers are particularly willing to offer great prices to keep themselves in work.

“The price of trades has definitely come down – if you call someone, they actually turn up now,” he says.

“I suspect people would like to do more DIY to save money but doing a bathroom and kitchen yourself is not as easy as people think.”

But furniture giant IKEA is reporting steadily increasing sales of its flatpack kitchens, despite the wintry economic climate.

“We suspect that a lot of people are probably not doing major renovations at the moment,” says IKEA spokeswoman Sarah Entwistle.

“However, wardrobe sales are well up on last year, so maybe a $500 improvement is still achievable for a lot of people. Or maybe they are spending more time at home and can’t stand the mess anymore?”

Renovation cheaper than moving

Property strategist for Macquarie Capital Advisers Rod Cornish says the increasing transaction costs of moving house – with stamp duty and real estate fees potentially adding up to $30,000 or more – make renovation more attractive in a tough economic climate.

“Renovations are always stronger when people think they can add value to a property, but in a climate of stable or falling house prices it’s unlikely that people can do that,” he says.

“What they do instead is adapt their property to suit them for longer and avoid the expense of having to move.”

Matt Judkins from Reno Brothers, who renovates for clients and his own investment, says the current economic climate makes it difficult to add value to property through renovation – but it’s not impossible.

“The opportunities still exist for renovators who are well-researched and have access to a team of trades and suppliers to get things done cost-effectively,” he says. “But for anyone who has never renovated before, I would say don’t start now or you could get burned.”

Judkins says keeping renovations to non-structural changes that cosmetically improve a property is the best value-add to make today.

Spinners’ Mark Mercer says installing bifold doors to create an indoor-outdoor living area – which costs between $5000 and $25,000 – is another low-cost renovation that improves the lifestyle for people living in the house, and adds value.

“Don’t just replace the 1970s kitchen, but knock down one of the walls and put in an island bench to create the whole open plan living area,” he says.

“Times like these make people more creative. If you can be creative and cost-effective, then you’ll be fine.”

 

RULES FOR RENOVATING DURING A RECESSION

  • Avoid over-spending on a renovation, which risks overcapitalising.
  • A good rule of thumb is to not spend more than 10 per cent of the value of a home on a major renovation.
  • Research the best value-add renovations in your area by tracking the asking prices on real estate websites. How much more money are four-bedroom homes fetching compared to three-bedroom homes? What about features like new kitchens and bathrooms?
  • SQM Research property analyst Louis Christopher suggests keeping track of local property sales each week by going to online real estate sites and writing down the asking price and features of each home in your area. “Then each week you aggregate the listings of, say, the homes with swimming pools and work out the median price. Then you compare that to the homes without swimming pools and work out how much value a pool can add,” he says.
  • Renovating is usually a compromise between what you want and the value you can add to a property – choosing mid-priced rather than cheap or expensive fittings and fixtures goes a long way to extending the budget and maintaining value.
  • Empire property investment CEO Chris Gray suggest aiming to add at least $1-$2 in value to your property for every dollar you spend on renovation. This should really help you focus your budget.
  • Don’t neglect basic home maintenance such as pest inspections or repairing gutters which can cause endless damage if left unattended. “Water damage that goes unrepaired can cost thousands later on,” says Mark Mercer. “And termites that munch through everything will cost you tens of thousands if you don’t sort it out straight away.”

 

This article first appeared in Handyman magazine

 

Category
Renovation & DIY