Popular television shows such as The Block and The Renovators which follow the trials and tribulations of amateur property renovators, have caused a resurgence in the number of home owners and investors donning their overalls and picking up paintbrushes in a bid to improve their assets and add value in today’s flat market.
According to recent data from Mortgage Choice, the number of customers refinancing in order to fund refurbishments and/or extensions to their properties increased by an average of 5 per cent from January to April 2011.
While figures from the Australian Bureau of Statistics show a spike in the refinancing of home loans for established dwellings of $3.17 billion in April; an increase of 22 per cent from the $2.6 billion worth of refinancing a year earlier.
Spokeswoman for Mortgage Choice Kristy Sheppard says this growing interest in home improvement is not surprising given the number of property owners choosing to “sit tight on their nest egg” and add value as they wait out the housing downturn.
“It is perhaps easier to sit tight and wait out the housing downturn until brighter days when higher capital gains on their home are more likely to be achieved,” says Sheppard.
“Nobody wants to lose equity they feel has already been built up but isn’t necessarily recognised in the present buyer’s market. Equity is an ever-moving beast and sometimes, in the short term, it falls.”
In an article published on news.com.au, Lisa Montgomery chief executive Resi Home Loans, explained Australians are a nation of “next-project people” and remain largely undeterred by the current property market malaise.
“Renovating makes us feel better and putting something new into our home is something that makes us feel better, particularly if we can’t move,” she says.
“If we cannot sell and move then we want something new, and if Mum wants a new kitchen, so she should have it.
“Our parents sat still for a long time but we are told we can have it all.
“Generally speaking, property prices are very sluggish.
“People are not looking to sell or increase their mortgage substantially, so what do they do? They renovate.”
While renovation is an excellent way to generate equity in a slow moving market, it’s not as easy at it looks on The Block.
The big concern is overcapitalizing and losing money – so do your sums carefully!