Australian owner-occupiers are continuing their love affair with home improvement, with findings from Westpac's 2017 Home Ownership Report showing a 21% increase in those who have renovated, are currently renovating or are planning to renovate since 2015.
The research surveyed over 1,000 Australian home owners and first home buyers about their home ownership aspirations over the next five years. Since 2015, there has been a 14% increase in home owner-occupiers planning to renovate their home in the next five years. The research also shows the number of those considering selling a home decreased by 11% compared to last year, bringing it back to the same level as 2015.
This trend is supported by recent research from Master Builders Australia forecasting a $44 billion boom in renovations over the next five years, with the strongest growth to be felt in South Australia, Western Australia and Queensland.
Home owners who are getting married or having a baby are increasingly prioritising renovating (both up 66% since 2016) over buying a new home (down 76% and 80% since 2016). A growing family also ranks among the top reasons for Australian home owners to pursue renovation rather than relocation.
Among home owner-occupiers planning to renovate, Westpac's research shows a 10% increase in those doing so to lower maintenance and upkeep, compared to a 15% decrease in those renovating to have a nicer home, suggesting that practicality is being favoured over a picture perfect home.
Westpac's home ownership spokesperson, Andy Wright, said home owners may be choosing to renovate rather than re-enter the property market for several reasons.
"It's no secret Australians love renovating, but those who are reaching key life milestones, such as getting married or having a baby, may also be increasingly choosing to renovate to avoid the stress and logistics of moving during an already busy time. Growing families also seem to be purchasing properties that need some TLC, with plans to upgrade in the future when savings have increased."
While millennial owner-occupiers are the most likely to already be on the renovation journey (87%), compared to their Gen X (78%) and baby boomer counterparts (77%), home owners approaching retirement are also putting renovating at the top of their list (33%) ahead of selling their home (13%).
The Housing Industry Association found stamp duty was the equivalent of 1% of the median house price in 1982, but is now as much as 5.2% in some states, making the average cost close to $21,000. This can be even higher in states such as Victoria and NSW, where stamp duty costs, on average, $31,970 and $25,190 respectively.
"Taking into consideration the additional costs of buying a new home, including stamp duty and moving costs, home owners may find that renovating is a more cost effective option, particularly if you work out a budget first, are a savvy shopper and are happy to undertake minor renovations such as painting or tiling," Mr Wright said.
"We offer our Westpac customers a range of flexible products and services to help fund their renovations including the option to redraw money they've paid into their home loan account, and topping up or refinancing their home loan to fund renovations. We're committed to helping our customers understand all of their options and the products that are suited to their needs," Mr Wright said.
For more information visit westpac.com.au/homeloans
Question: What surprised you about the recent Home Ownership Report?
Andy Wright: The key finding from this research is more home owners are choosing to renovate rather than relocate. The report showed there has been 21% increase nationwide in those who have renovated, are currently renovating or planning to renovate since 2015. Meanwhile, there has been an 11% decrease in those considering selling their home since 2016.
Home owners who are getting married or having a baby are driving this trend, with both groups increasingly prioritising renovating (both up by 66%) over buying a home (down by 76% and 80% respectively).The number of home owners who are prioritising renovating because their family is growing has doubled since 2016.
Question: Why do you believe many Australians are renovating their home rather than relocating?
Andy Wright: Australians have always had a love affair with renovating, and we're seeing its popularity increase lately perhaps because of hit renovation television shows. For many of us the weekend isn't complete without some DIY activities.
For those reaching key milestones in their lives, such as starting a family, renovating may be a way to avoid the stress of moving during an already busy period of their lives, or as a way of -nesting' to make a place more of their own.
When it comes to buying a home, it isn't just about the building itself - it's also about the location. Many people purchase their first homes intending to live there for many years, especially since the property market can be difficult to get a start in. So, it seems buyers are more comfortable tweaking their existing homes rather than facing the challenge of finding a new one.
Question: How does stamp duty play into the choice of renovating instead of moving?
Andy Wright: These trends may also be driven by the fees associated with moving, such as stamp duty costs, which can make renovating a more cost effective option.
Stamp duty can be as high as 5.2% in some states, equating to approximately $21,000. Taking this into consideration, homeowners may find that renovating is a more cost-effective option, particularly if you work out a budget, are a savvy shopper and are able to undertake DIY renovations.
Question: Why do Australians need to renovate their homes?
Andy Wright: From our Home Ownership Report, we found that those who have hit recent life milestones are the most likely to decide to renovate, particularly those who have recently been married or had a baby. These Australians renovate in order to create more space for their growing family. In many cases, it is easier, and sometimes cheaper, which is why many decide to renovate rather than relocate.
Question: What tips do you have for Australians wanting to renovate over relocating?
Andy Wright: 1. Plan with extra padding: Failure to plan can mean planning to fail, and result in you blowing your budget so factor in extra emergency funds
2. Remember to call a professional: For major works which require qualified experts
3. Learn to DIY the small stuff: For minor renovations like tiling or painting, attend a DIY workshop at your local hardware store or search online for DIY tutorials that you can try out at home
4. Shop savvy: Sales can be a great way to get new fixtures, fittings and furniture
Question: What other things are Australians prioritising over moving?
Andy Wright: Our research focused on renovating, and why more home owners are choosing to renovate rather than relocate. It showed there has been a 21% increase in those who have renovated, are currently renovating or planning to renovate since 2015, compared to an 11% decrease in those considering selling their home since 2016.
Question: Can you talk us through the current options for First Home Buyers?
Andy Wright: As Australia's first company and bank, Westpac has a long and proud history of helping First Home Buyers into their first home sooner. We offer a range of loans and flexible products to suit each individual's needs. We also have specialised home lending experts available to talk to anyone considering buying their first home, and can offer personalised advice based on their circumstances.
For more information, visit https://www.westpac.com.au/personal-banking/home-loans/first-home/owner-occupied/
Question: What advice do you have for first home buyers saving for their first property?
Andy Wright: 1. Set a budget – before you commence your search for a new home, work out a realistic budget to understand what you can afford. Set up a spreadsheet to monitor your income minus your everyday expenses. This will be an indicator of how much you'll be able to commit to repayments.
2. Find the right loan – It is important you speak to a home loan specialist or a home finance manager as they will be able to suggest a loan that is in line with your needs and lifestyle. Speak with one of Westpac's Home Finance Managers to receive tailored advice to suit your personal situation.
3. Factor in additional costs and milestones – In addition to financing the purchase of a new home, it is important to factor in other expenses such as furniture and other essentials. Make a list and research what the expected cost many of these items are, even if you don't intend to purchase now. Think about your life milestones, such as starting a new career or family, and understand how these may affect you financially.
4. Do your research – it's important you inform yourself on the different options available to you to achieve your home ownership goals.
Interview by Brooke Hunter