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Renovation Nation: 37% of Aussie homeowners are renovating this year

Renovation Nation: 37% of Aussie homeowners are renovating this year

Australia has become a nation of renovators according to new research which shows more than one in three homeowners are improving their homes this year.

A new RateCity.com.au survey of over 1000 Australians found that of the people who owned a property, 37 per cent of respondents were altering or renovating their homes in 2021.

Among those renovating, the most popular amount to spend was between $5,000 and $25,000.

The survey also found that 22 per cent of people who had been saving for a holiday in the last year, but could not travel because of COVID, are instead using that money on a renovation.

Why are so many Australians renovating?

RateCity.com.au research director, Sally Tindall, said lifestyle changes brought on by COVID has been a driving force for many Australians to renovate.

“Lockdown living has seen many families save. In fact, according to APRA, there’s $124 billion more in the bank from households compared to a year ago at the start of COVID,” she said.

“Expensive overseas holidays have been delayed or cancelled, helping people to save more money. Our survey also found that 22 per cent of people who were saving for a holiday in the last year are re-directing that money towards a renovation.

“As well as tapping into savings, more Australians are also taking out loans to pay for their renovations,” she said.

In the last year, owner-occupier homeowners have taken out a total of $3.12 billion in loans for alterations, additions and repairs, according to the latest seasonally adjusted ABS data.

“Working from home has made many people realise they need larger, more functional homes.

“While moving to a bigger house can often be an easy fix for people looking to upgrade, a lack of stock in a booming property market has made this option financially unviable for many families.

“Many people are finding it is more economical to renovate their own home than to buy and sell, particularly when factoring in costs such as stamp duty,” she said.

Options to finance a renovation

    • Savings: Tapping into existing savings can be a low risk, straight forward option.
    • Offset/redraw: If you are ahead on your mortgage repayments you could pull this money out. However, be aware the longer you take to put that money back in, the more it will cost you in the long run.
    • Withdrawing equity from your home: If your home has increased in value, you might be able to pull out equity by refinancing. While the interest rate on a refinancing deal is likely to be lower than a personal loan, if you pay that money back over 30 years it could end up costing you more in the long run.
    • Construction loan: For large renovations or rebuilds a construction loan can be added on top of your existing home loan. These loans can be interest-only for a period of time before they revert to principal and interest.
    • Personal loan: Typically, you can borrow up to $50,000 for a personal loan to fund renovations and it can be either secured or unsecured. Interest rates have a huge range and will often depend on your credit history. If you you’re looking for ‘green’ upgrades, there are ultra-low rate options available, including 0.99% from CBA. 

The cost of taking $50,000 from your home loan

RateCity.com.au has crunched the numbers on how much extra the average customer with a $500,000 home loan balance and $50,000 in their offset would pay in interest if they used their offset money to renovate their house.

If they put the $50,000 back into the offset account in equal instalments over 5 years they would pay an additional $6,533 in interest, compared to if they didn’t withdraw the money.

However, if they put this money back over 10 years, instead of 5, the extra interest paid would rise to $12,605.

ScenariosEstimated total interest paid over 25 yrsExtra interest paid by taking out $50,000
Leaving $50K in offset account for remainder of loan

$158,159

Taking $50K out of offset and returning the money over 5 yrs

$164,691

$6,533

Taking $50K out of offset and returning the money over 10 yrs

$170,764

$12,605

Source: RateCity.com.au Assumes $500,000, 25 years remaining on home loan, paying principal and interest on the RBA average existing customer variable rate of 2.95% and that the first instalment back into the offset account happens on day 1. Assumes monthly repayments and interest rates remain the same. Calculations are estimates only.

Tips for homeowner renovating

  • Factor in a buffer as budget blowouts are common.
  • If you take out a loan or use your offset/redraw repay the money as quickly as possible.
  • Compare notes and quotes by joining renovating forums and speaking to friends.
  • Get multiple quotes from tradies and suppliers.

RateCity.com.au research director, Sally Tindall said: “Factor in a buffer because when it comes to renovations, blow outs are commonplace.”

“If you are getting a loan to fund your renovations, work out how much extra you will need to pay both in your monthly repayments but also over the life of the loan,” she said.

If you are taking money out of your offset account or redraw facility, try and put that money back as quickly as you can. The longer it takes to repay the money, the more you’ll pay in interest.

Joining a renovating forum or talking to friends who have recently done up their house can help you find suppliers and tradies,” she said

How much people who are renovating this year are planning to spend

ValuePercent
Less than $5,00022%
$5,000 - $25,00040%
$25,000 - $50,00015%
$50,000 - $100,00010%
More than $100,00013%

Source: RateCity.com.au survey

Home improvement personal loans

Company
Product

Low Rate Personal Loan Unsecured (Excellent Credit)

Real Time Rating™

4.33

/ 5

Winner of Excellent Credit Personal Loans, RateCity Gold Awards 2022

Interest Rate

5.45

% p.a

Fixed up to 7.05%

Comparison Rate*

6.07

% p.a

Fixed up to 7.4%

Monthly repayment

$905

36 months

Real Time Rating™

4.33

/ 5
Go to site
Total Repayments icon

Total repayments for a 3-year, $30,000 loan at 6.07% would be $32,587*. Terms from - years

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No extra repayment or early exit fees. Funding approved in 24 hours. Up to $75,000 loan amount

Winner of Excellent Credit Personal Loans, RateCity Gold Awards 2022

Company
Product

Unsecured Personal Loan - (Excellent Credit)

Real Time Rating™

3.91

/ 5
Interest Rate

6.45

% p.a

Fixed

Comparison Rate*

7.27

% p.a

Fixed

Monthly repayment

$919

36 months

Real Time Rating™

3.91

/ 5
Go to site
Total Repayments icon

Total repayments for a 3-year, $30,000 loan at 7.27% would be $33,076*. Terms from - years

Company
Product

Plenti Personal Loan (Excellent Credit)

Real Time Rating™

4.29

/ 5
Interest Rate

6.39

% p.a

Fixed up to 7.89%

Comparison Rate*

6.39

% p.a

Fixed up to 8.49%

Monthly repayment

$918

36 months

Real Time Rating™

4.29

/ 5
Go to site
Total Repayments icon

Total repayments for a 3-year, $30,000 loan at 6.39% would be $33,047*. Terms from - years

Company
Product

Unsecured Personal Loan

Real Time Rating™

4.11

/ 5
Interest Rate

6.99

% p.a

Variable up to 18.99%

Comparison Rate*

7.91

% p.a

Variable up to 19.83%

Monthly repayment

$926

36 months

Real Time Rating™

4.11

/ 5
Go to site
Total Repayments icon

Total repayments for a 3-year, $30,000 loan at 7.91% would be $33,342*. Terms from - years

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Borrow from $5,000 to $55,000 with a 1 - 7 year flexible loan term with NAB. Plus enjoy no fees for extra repayments and no early exit fees.

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This article was reviewed by Research Director Sally Tindall before it was published as part of RateCity's Fact Check process.

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