Knowing when to stay in your home - and when to go
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Knowing when to stay in your home – and when to go

If living your best life is on your 2023 to-do list, it might be time to consider a change of address

By Jeremy Stevens
Wed, Jan 4, 2023 9:37amGrey Clock 4 min

You’ve been successfully climbing the property ladder, leapfrogging towards the prized dream home. But lifestyle or family circumstances can change and a volatile market can make choosing between renovating or moving unclear. Do you take the renovation plunge? Or just avoid potential pitfalls and for peace of mind – and your hip pocket – simply seek that ready-to-go turnkey dream house instead?  

Carl Wilson from Home Estate Agents has been a Sydney realtor for 35 years. He’s well acquainted with this dilemma. 

“They’re at a crossroads,” he says. “Houses are around but they’re price prohibitive. Any reasonable free-standing house in Sydney’s east is $3m upwards – even semis are attracting $2.5-3m.” 

Despite a recent downturn, he says there has been price growth everywhere from Brisbane and Melbourne to Sydney. 

“There was a completely rundown Coogee semi that sold in 2020 for $3.75m, now on the market after reno for $5.5m – but then, they’ve spent $2m on it.” 

So, is the ‘renovate or move up’ conundrum more about growing family needs or profit potential? Wilson agrees that families requiring more space is often the overriding motivation. 

COVID, living and material cost rises have shifted peoples’ expectations even more. 

“All of those are a determining factor and they are deterrents to renovating,” he says. “Plus, there’s the DA process, compliance, build-time blowouts, unforeseen added cost – it’s two years of pain.”

It might seen reasonable for investors, Wilson says, but it’s not so much fun if you’re living in your family home as it’s renovated. 

“It can destroy marriages,” he says. “A turnkey might be $1million up on where they are but at least there’s certainty.”

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Building cost increases have also taken their toll. 

“Five years ago you could renovate a semi for $300,000 to $400,000 but it’s now $1million and potentially $2 million,” he says. “There’s also the issue of pricing by postcode. The overcharging of clients in affluent areas is a reality. 

“Alternatively, longtime city residents may sell out and buy up or down the coast. But now, NSW coastal houses worth $400,000 a decade ago can now be $1.5m. 

“Ready-to-go residences are becoming a necessity, but there’s never enough around.”   

To further muddy the waters, chances are it’s probably going to get worse. The pandemic has given people that didn’t previously have the money more capital, says Wilson. They accessed superaunnuation and halted spending on travel, new cars or entertainment. Plus, lockdowns and families all stuck at home together has given people pause.

 “When COVID hit, some moved out of units into houses to alleviate living pressures,” he says. “Now, they’re moving back into units but craving the extra space.”

Builder Gregg Jowett from iRenov8 has been in the industry for 33 years, building from the ground up, managing reality TV builds. He now focuses primarily on bespoke renovations mainly in Sydney’s east and inner west. 

“My typical clients are married parents of younger children, remortgaging because they’ve invested so much equity in their property,” he says. “My builds are a combination of creating more space, as well as purely aesthetic work. I do three to four jobs a year, typically six to eight months each. 

He says most of his clients are on their second property, renovating and staying put for a while. 

“There’s two types,” Wilson says. “One has renovated before and they tend to trust us completely. But to those new to renos, it’s never as streamlined as they think. They watch lifestyle TV shows and think they can do a lot themselves.” 

He says COVID  gave people pause to consider their options. 

“It’s about finding the right builder/architect combo,” he says. “Some people don’t spend money on decent architectural drawings, but they’ve still got to get through council and the ambiguity makes it hard for builders.”

Hector Abbott is a commercial property developer living in his third property since starting a family. He upgraded from a semi to a four-bedroom, freestanding home in Coogee eight years ago, a 1920s cottage that had been fully-renovated by an owner/builder. “He lived in it for a decade before we found it,” he says. “We needed more space to accommodate our teenage daughters. We searched for two years, coming across several houses that ticked boxes but not enough. When you have to donate a six-figure sum to stamp duty, it’s not a decision made lightly.”

The thought of renovating as opposed to buying a turnkey held no appeal at all.

“I work from home,” he says. “I need an office and being disrupted whilst in a renovation, or renting another property while overseeing a build, is too much to contemplate. 

“That said, four years ago we did an exterior renovation. We repainted the house, landscaped and rebuilt a pergola.”

The endgame for Abbott was always about a long-term abode. 

“I’ve no desire to own a $25m mansion,” he says. “The house is centrally located. The kids have grown up here and we have no desire to downsize. Investment return was never an issue, even though this area is bulletproof. Why on earth leave?”

 

Can’t decide whether to move or improve? Ask yourself these questions

Do you love where you live? If the kids are in school or there’s a great sense of community, staying where you are and renovating may offer a better lifestyle for everyone

What are house prices doing? If property prices in your area have risen significantly and you’re looking to downsize, or you’re after a seachange, you could sell up and unlock some of the equity in your property

Is your place unlivable? This means different things to different people – it may be too small, too old or too rundown. If you’re thinking of renovating, consider the rising costs of building materials and access to trades

Will selling and buying cost you more? ‘Dead money’ like stamp duty could be ploughed into a renovation. Check what costs you may be up for before making a final decision



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How much income is required to service a mortgage? It depends on where you live

New research suggests spending 40 percent of household income on loan repayments is the new normal

By Bronwyn Allen
Thu, Apr 25, 2024 3 min

Requiring more than 30 percent of household income to service a home loan has long been considered the benchmark for ‘housing stress’. Yet research shows it is becoming the new normal. The 2024 ANZ CoreLogic Housing Affordability Report reveals home loans on only 17 percent of homes are ‘serviceable’ if serviceability is limited to 30 percent of the median national household income.

Based on 40 percent of household income, just 37 percent of properties would be serviceable on a mortgage covering 80 percent of the purchase price. ANZ CoreLogic suggest 40 may be the new 30 when it comes to home loan serviceability. “Looking ahead, there is little prospect for the mortgage serviceability indicator to move back into the 30 percent range any time soon,” says the report.

“This is because the cash rate is not expected to be cut until late 2024, and home values have continued to rise, even amid relatively high interest rate settings.” ANZ CoreLogic estimate that home loan rates would have to fall to about 4.7 percent to bring serviceability under 40 percent.

CoreLogic has broken down the actual household income required to service a home loan on a 6.27 percent interest rate for an 80 percent loan based on current median house and unit values in each capital city. As expected, affordability is worst in the most expensive property market, Sydney.

Sydney

Sydney’s median house price is $1,414,229 and the median unit price is $839,344.

Based on 40 percent serviceability, households need a total income of $211,456 to afford a home loan for a house and $125,499 for a unit. The city’s actual median household income is $120,554.

Melbourne

Melbourne’s median house price is $935,049 and the median apartment price is $612,906.

Based on 40 percent serviceability, households need a total income of $139,809 to afford a home loan for a house and $91,642 for a unit. The city’s actual median household income is $110,324.

Brisbane

Brisbane’s median house price is $909,988 and the median unit price is $587,793.

Based on 40 percent serviceability, households need a total income of $136,062 to afford a home loan for a house and $87,887 for a unit. The city’s actual median household income is $107,243.

Adelaide

Adelaide’s median house price is $785,971 and the median apartment price is $504,799.

Based on 40 percent serviceability, households need a total income of $117,519 to afford a home loan for a house and $75,478 for a unit. The city’s actual median household income is $89,806.

Perth

Perth’s median house price is $735,276 and the median unit price is $495,360.

Based on 40 percent serviceability, households need a total income of $109,939 to afford a home loan for a house and $74,066 for a unit. The city’s actual median household income is $108,057.

Hobart

Hobart’s median house price is $692,951 and the median apartment price is $522,258.

Based on 40 percent serviceability, households need a total income of $103,610 to afford a home loan for a house and $78,088 for a unit. The city’s actual median household income is $89,515.

Darwin

Darwin’s median house price is $573,498 and the median unit price is $367,716.

Based on 40 percent serviceability, households need a total income of $85,750 to afford a home loan for a house and $54,981 for a unit. The city’s actual median household income is $126,193.

Canberra

Canberra’s median house price is $964,136 and the median apartment price is $585,057.

Based on 40 percent serviceability, households need a total income of $144,158 to afford a home loan for a house and $87,478 for a unit. The city’s actual median household income is $137,760.

 

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