Northern Territory Property Report
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
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
Northern Territory Darwin Across the greater Darwin area, there are a variety of factors behind home owners decisions to undertake home renovations. For owners who have built up significant home equity, renovating can be a sensible option to add value or amenity to a home. A desirable location can also be a major factor in the choice to renovate. Owners often find that over time their property doesn t meet the needs of their family but if there is an abundance of nearby facilities or places of employment, they may opt to renovate rather than relocate. In the higher-value suburbs of Darwin, some purchases are made with immediate renovations in mind. However, in the entry-level suburbs, we often see a young family buy a home and gradually renovate it as time and money permits. AVOIDING THE RISK OF OVERCAPITALISING In Darwin, as in many parts of Australia, renovation spending doesn t always translate to an equal rise in the property s value. This is partly because buyers often demolish existing features in a home in order to replaced them. For instance, a dated yet functional kitchen might be removed and replaced with a brand new one, and this can go part of the way to explain why renovations don t always generate a dollar for dollar capital gain. There are a number of strategies Darwin home owners can consider to avoid the risk of overcapitalising. For instance, refitting an existing kitchen or bathroom tends to be a far less expensive option than relocating to another part of the home, given the expense of plumbing and wet area preparation. Darwin s outdoor lifestyle means that a renovation such as the addition of a swimming pool or outdoor living space can add considerable value to a home. Garages are another popular addition where the cost is likely to be supported by an increase in the home s value. 4
BUDGETING FOR THE COST OF RENOVATION Across Darwin the cost of renovating often exceeds the cost of a new build on a per square metre basis. In part, this is because there is a limited supply of builders available to work on renovations compared to new builds. Additionally, because many of the dwellings undergoing renovation are older homes, owners need to be prepared for unforeseen structural issues that may not always be apparent before building works begin. Importantly, it is always worth remembering that regardless of how much money is thrown at a property, some locations do have a price ceiling. This is something owners need to be mindful of when setting renovation budgets. POPULAR DARWIN SUBURBS FOR RENOVATORS At present, the inner and northern suburbs of Darwin, such as Fannie Bay, Stuart Park, Nightcliff and Rapid Creek, are popular locations for renovation activity. Allotments in these areas tend to be greater than 800 square metres, and in some cases up to 1,200 square metres, allowing plenty of scope for extension. And the dwellings are often older homes that are ready to be brought up to modern standards. Importantly, it is always worth remembering that regardless of how much money is thrown at a property, some locations do have a price ceiling. 5
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