Only ten per cent of renovations cost more than $150,000 to complete last year, according to a new survey, providing some insight into the number of renovations that may be eligible for the government’s $680 million HomeBuilder scheme.
The Houzz and Home renovation trends survey, of 4500 people fielded before the COVID-19 pandemic, revealed the typical home renovation project cost $20,000, and generally consisted of three rooms.
It’s not known how the coronavirus will impact renovations
Nearly one in two (48 per cent) of homeowners planned on starting or continuing a renovation this year, but the data -- captured in February and March -- precedes the disruptive reality brought about by the pandemic.
“Subsequent surveys have shown that four-in-five homeowners who were in the midst of a
project at the start of the pandemic were able to continue with renovations,” said Marine Sargsyan, a senior economist at Houzz.
“Some homeowners have opted to delay certain elective renovations due to implications related to social contact, labour and material availability and personal discretionary spending.”
Ms Sargsyan said the projects could be put on the backburner until they can be carried out, “setting the stage for a renewed burst of activity following the pandemic”.
A $25,000 HomeBuilder grant, but there’s a catch
The Federal Government has launched a $680 million grant to help “the residential construction market by encouraging … new home builds and renovations”. A $25,000 grant may be available to eligible owner occupiers looking to build a new home or substantially renovate the existing home before the end of this year.
But there are a couple of catches, including that the renovation will have to be valued between $150,000 and $750,000.
Houzz and Home’s survey of 4500 people found just ten per cent spent $150,000 or more on their renovation last year.
Other criteria must be met as well to qualify for the HomeBuilder grant. This includes:
- Individuals earning less than $125,000 per year, and couples earning less than $200,000 combined
- The building of a new home cannot be on land worth more than $750,000
- The value of a residential home being renovated can’t be more than $1.5m before construction
Securing $150,000 for a renovation
There are a few ways to help secure the funds for a renovation valued at $150,000 or more.
The most obvious is saving the money, whether it is being banked in a savings account, or accumulating in an offset account of -- what is most commonly -- a variable rate mortgage.
Using the money repaid in an offset account could increase the balance owing on a loan, and may result in more interest being charged as it is being calculated on a larger sum.
Some loans have a redraw facility and this works in a similar way to an offset account. Extra repayments made to a loan can be redrawn to finance a renovation, but this too forgoes reduced interest charges.
The final option is to shop around for another mortgage and refinance. It might be possible to find a mortgage with a cheaper interest rate and options that are more flexible, but keep in mind breaking a mortgage often results in exit fees.
What did people renovate and how much did it cost?
The most costly renovations were typically undertaken on kitchens, according to Houzz and Home’s survey, and cost about $15,000. They were followed by renovations to master bathrooms ($13,000) and to guest bathrooms ($10,000).
Four out of five renovations were paid by people dipping into their savings, while credit cards -- were used in one-in-five cases -- mostly by Gen Xers; people aged 41 to 55 years old.
Prep times generally took twice as long as the renovations themselves, the survey found. Construction time on average took from 2.4 to 5.7 months.
Professionals were commissioned to complete the renovations in 89 per cent of cases. Most commonly, these were electricians (60 per cent) and plumbers (45 per cent).
Who was spending?
Baby boomers, aged from 55 to 74 years old, accounted for nearly half -- 45 per cent -- of all of the renovations in 2019. About 53 per cent of them intended to live in their homes for a decade.
“Project scope and spend have remained stable and we’re seeing Baby Boomers continue to bring consistency to the market as they pursue projects that will allow them to age in place,” said economist Sargsyan.
“Following significant growth in home renovation activity over the past few years, we’re seeing
the market settle somewhat in terms of activity.”
Baby Boomers and Gen Xers generally made the decision to start a home renovation project because they finally had the time (at 39 and 30 per cent, respectively) and the money (at 42 and 39 per cent, respectively).
Millennials, aged from 23 to 38, chose to renovate in 38 per cent of cases because they wanted to customise a home they recently bought.