Western Australia Property Report October 2016

Transcription

1 Western Australia Property Report

2 National Overview Across Australia many home owners are undertaking or planning major home renovations inspired, perhaps, by all the renovation shows dominating our TV screens, and funded by increased home equity and historically low interest rates. Renovations can be carried out for all manner of reasons, from adding space for a growing family to restoring a character home back to its original glory. But large-scale renovations do not come cheap, and with the buoyancy of the residential property market varying widely across the nation, home owners need to be mindful of the risk of overcapitalising. OVERCAPITALISING LESS OF A CONCERN IN AREAS EXPERIENCING STRONG GAINS Overcapitalisation is less of a spectre in some areas. For instance, in inner-city areas such as Melbourne s Malvern East Gascoigne Estate, heritage homes have the benefit of an outstanding location close to the city and popular private schools, plus an abundance of local amenities. This supports a dollar-for-dollar increase in value or more following a major renovation. In Western Australia, homes along the narrow coastal strip of the Bussell Highway can be prime targets for renovation. In Sydney s western suburbs, older apartments lend themselves to modernising renovations. And because a unit has a smaller footprint than a house, there is a natural limit on the level of work that can be undertaken, which helps protect owners from overcapitalising. But in other areas, such as central Queensland, where the property market is very soft following the end of the mining boom, some owners have negative equity, which makes large-scale renovations high-risk undertakings. HOMES BY THE WATER ARE PRIME RENOVATION TARGETS Our national love affair with water means it can be hard to overcapitalise on waterfront homes. In Western Australia, homes along the narrow coastal strip of the Bussell Highway can be prime targets for renovation. The area s geography means that new homes can only be built further inland, thereby underpinning future gains for properties along the waterfront strip. That said, an 1890s cottage in Hobart s Battery Point that has undergone tremendous renovations is currently listed for sale at over $5 million a price point that will be a litmus test for how much Tasmanian buyers are prepared to spend for outstanding water views. 2

3 EXPERT SUPPORT IS A WISE INVESTMENT The key to successful renovations is to make improvements with not just your personal tastes in mind. Always consider what buyers in your area are willing to pay for. Spending a fortune renovating a 3-bedroom home, for instance, may not deliver worthwhile gains if the local market demands 4-bedroom dwellings. Understanding what buyers look for in your neighbourhood, opting for renovations that are sympathetic to the local streetscape, and using a reputable team of tradespeople are all good starting points to enjoy renovation success. If in doubt, speak with experts such as real estate agents and, of course, registered valuers for appraisals of whether your planned improvements are likely to add worthwhile gains to your home s value as well as your lifestyle. Brendon Hulcombe CEO 3

4 Western Australia Perth There has been a long-term trend of renovating and upgrading in Perth, particularly in the ring of suburbs within 5 kilometres of the CBD. The addition of living space tends to be a primary motivator for renovations in Perth, along with the prospect of enjoying better value for money by renovating in comparison to relocating. In particular, the charging of stamp duty can make it more cost effective to renovate a home in an area the owner loves, rather than pull stumps altogether. Personal needs tend to dictate the most appropriate time for owneroccupiers to renovate in Perth, though from an investor s point of view, the best time is when a suburb is active and values are on the move. Buying a property that needs work, upgrading it, and putting it back on the market as quickly as possible can be a way of securing a decent capital gain. Renovating costs are typically higher in Perth than in many other locations. As a guide, construction costs can be up to 30% more than those for equivalent projects on Australia s east coast. At the lower end of the scale, internal renovations of bathrooms and kitchens can be completed for as little as $10,000, though this cost can quickly blow out if further bathrooms are added. As soon as structural changes are required or extensions are added, the project cost can hit $100,000 very quickly, and a first-floor addition can require a budget of $200,000. Overcapitalising is always a trap to avoid, regardless of location, and it can easily happen if owners are led astray by builders or salespeople. In the Perth area, one of the traps we consistently see home owners fall into is to overspend on preparing their homes for the market, in the mistaken belief that spending more on a project will always add greater value to a home. 4

5 South West The South West offers good opportunities for buyers looking to renovate homes. The coastal strip located on the northern side of Bussell Highway and comprising the suburbs of Busselton, West Busselton, Broadwater and Abbey is worth a look. This coastal strip is just 500 metres in width and stretches for approximately 10 kilometres along Geographe Bay in an area supported by good infrastructure. This fairly exclusive portion of land is fully established and features well-presented homes generally built between the 1960s and 1990s, some of which are suitable for renovation. As the City of Busselton continues to grow at a healthy rate, homes along the coastal strip are expected to grow in value owing to the limited supply of land with proximity to the waterfront. This is a key factor that reduces the risk of overcapitalisation in this area. The current softer market gives prospective buyers the opportunity to pick up poorly presented homes at very good prices and renovate for a profit. Moving 50 kilometres north of Busselton, the townships of Bunbury, South Bunbury and East Bunbury feature older homes close to the beach and town centres. Renovating these older homes would considerably increase values in these areas, and spending just a few thousand dollars on a property can potentially add $20,000 to its market value. The current softer market gives prospective buyers the opportunity to pick up poorly presented homes at very good prices and renovate for a profit. The market is willing to pay for well-presented properties but not for those that present at a low or even an average standard. 5

6 Local expertise. National strength. Trusted solutions. Herron Todd White is Australia s leading property valuatiuon and advisory group. For more than 45 years, we ve given our customers peace of mind and the confidence to make good-decisions for their vital property investments. Whether you are buying or selling, expert independent advice is the smartest property investment you can make. Liability limited by a scheme approved under Professional Standards Legislation. The scheme does not apply within Tasmania. Telephone admin@htw.com.au htw.com.au