If you’re like many people thinking about updating their home right now, you’re probably asking yourself “should I renovate or rebuild?”. With all that’s happening with property prices in Sydney and soaring construction costs, you need to manage the risks of your project.
Looking at one side of the equation, here are some reasons why renovating your home in Sydney may make more sense than knocking down and doing a new build, including a step-by-step run down of how these played out for one of our clients in Ryde, NSW.
- A smart renovation will create more value than what it costs you
As a general rule, for every dollar you spend on a renovation you create $2 of perceived value. With the right design and planning, the value you create could even be higher.
As Building Designers, we create a design to match your renovation goals and budget and consider a wide range of factors to help maximise the value it creates, be it for short-term gain, as you may do with an investment property, or as part of a longer-term strategy, such as a forever home.
Renovation and addition for 1950’s 3-bedroom cottage home with external garage. The goal was to achieve an open living plan and 4 extra-large bedrooms on first floor with a 2 car tandem garage and a swimming pool. Natural light, ventilation and National Construction Code (NCC) requirements were an issue. The purchase price of the property was $2.1m.
2. Knock down and rebuild pricing and materials supply shortage
You’d be hard-pressed getting through any news bulletin not hearing about the state of the construction industry in Sydney. When evaluating the cost of a renovation vs knock down rebuild remember the bigger the project, the more materials and labour you will need, and when supply levels are down, as we’re currently seeing, it can only mean one thing….. upward pressure on costs and more money you need to put into the project.
A renovation can give you a stunning result at a fraction of the price and may even give you more to brag about!
According to CoreLogic last year, a lot of pressure on the building industry came from a surge in dwelling approvals happening at the same time supply chains were disrupted resulting in severe materials shortages. Since this report, even more pressure has been added, including the need to rebuild flooded communities in both NSW and QLD. In the last month alone we’ve seen reports that steel prices are up 70%, and timber has gone up 40%.
Estimated construction costs for the renovation and addition $600k. Construction costs for a knockdown and rebuild were estimated in the vicinity of $800k.
3. The dangers of over-capitalising with a knock down and rebuild
Like any investment, you need to be clear on your property goals and crunch the numbers accordingly. Where a knock down and new build may be profitable in one suburb or set of circumstances, it may not apply to another, and with the uncertainty and unpredictability of Sydney house prices at the moment, over-capitalising is a concern that needs to be taken seriously.
A renovation in most cases is a more financially conservative option. If you renovate so it is aligned to the budgets and wants of the majority of the demographic buying in your area (…with a bit of a buffer should property prices take a dive), you’re more likely to be safeguarded from over capitalising when compared to some knock-down and rebuilds.
A building designer can assess your site and provide you with some high level renovate vs rebuild costings to keep in mind when doing the numbers or talking to your accountant.
If the clients were planning on staying in the property for the next 15-20 years as a family home, a knock-down and rebuild may have been justified. As the intention with their home was to add value and then sell it, a renovation met their property objectives better.
There is no greater reality check than access to finance. Generally speaking, if you have equity in your home, getting the finance to do your renovation most likely will be simpler than financing the new build, which can be quite complicated. (If you’ve been through this before, you’ll know what we mean.) As always, each person’s circumstances are quite different, so speaking with a mortgage broker and getting the appropriate financial advice is important to make sure you understand what is right for you. We recommend speaking with a mortgage broker like Hunterwood Solutions.
You also need to ask yourself if you really want the level of debt a knock down and rebuild could represent for you? Could that hold you back from doing other things in your life?
Although we won’t go into the financing of the Ryde project specifically, by making sure you’re clear on how much money you have access to not only helps avoid financial disaster and also reduces the chances of ending up with a half-completed project.
5. You often don’t need to move out of your home
Your kids are settled in school, your favourite supermarket is just around the corner, and you’ve got the bus commute to the station fine-tuned to the second, do you really want the hassle and expense of moving out and renting another home while the knock down and build is taking place? That often can mean 12-18 months of being out of your own home and neighbourhood.
Although you may experience some short-term inconvenience and mess, and may need to bunk in with in-laws a bit, a renovation tends to take a lot less time and life pretty much can tick along as usual.
Because we were gutting out the whole property and removing the entire roof, our clients had to move out. In saying that, the home was ready to move back into within 6 weeks once it was watertight and they could continue the renovations. They got to enjoy the advantages of a ‘live-in reno’ for a good chunk of the time.
6. You can do it in stages
Rome wasn’t built in a day, nor does your home renovation have to be either. By getting an expert building designer involved, all aspects of your living circumstances will be considered and they can design and plan your home renovation in manageable stages to minimise inconvenience to you.
It may also suit your renovation budget better too.
Once our clients moved back in after the major works, painting, tiling, kitchen and joinery could take place bit by bit without the stress of timeframes.
7. Environmental impact
There are two ways to consider the environmental impact. First of all, a renovation is essentially an ‘upcycling’ process, and if you are seriously wanting to reduce the impact to the environment, it would be hard to argue that a thoughtful renovation wins hands down, especially if it has been designed to incorporate sustainability principles.
There is also the environmental impact on the character of your street and suburb. A clever renovation can often achieve the living and style enhancements you’re after, without harming the charm of your street.
Careful consideration took place to lower the environmental footprint. During demolition, many items were repurposed, such as timber offcuts and old joinery added to the garage as a workshop. Cladding was also carefully selected.
Don’t get us wrong. We love knock down rebuilds too, and for many people it is the ideal solution for their circumstances. It all boils down to what you want the renovation or new build to do for you, and do economic factors also need to come into the picture to make sure the house of your dreams doesn’t turn into regret.
Whichever way you go, there is one thing you can be certain of. Careful design and planning by a building design expert is key and can make an enormous difference to the success of your project, not to mention the visual impact and functionality. If you would like to know more about what you should keep in mind when deciding on a renovation or knock down rebuild, you can contact our design team for ideas that can help.
If you are considering a renovation or addition, we also recommend reading FIVE Simple Steps for Renovating Your Home like a Pro.