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Doing your own renovations can be more expensive than you
A RUSH to renovate by property owners who don’t want to
sell into the flat real estate market is threatening to create
a new set of financial problems.
Many people risk overcapitalising their homes and being
disappointed when they eventually sell, says EPS Property Search
director and author Patrick Bright.
“Those homeowners who have overcapitalised are being exposed more
than ever, leaving many at risk, particularly in areas where the
market has softened quite significantly,” he says.
“The number one cost people try to avoid by renovating is stamp
“Unfortunately, they don’t realise they can tear up just as much,
if not more, by overcapitalising on a renovation.”
Recent government data has showed increases in renovation activity
but declines in new home building starts amid falling real estate
Growing numbers of renovators are opting to take a do-it-yourself
New research from Canstar Blue shows 73 per cent of people are
doing the majority of house painting themselves.
Generation X those aged 30 to 50 years are more likely to ditch
professional painters, the research found.
However, fresh paint or more expensive renovations cannot insulate
property owners from the broader market declines, with capital city
house prices slumping between 1.2 per cent and 9.1 per cent over
the past 12 months.
Figures released last week by RP Data and Rismark suggest the
national housing slump seems to be slowing, with capital city home
values down 0.2 per cent in September.
“In the month of September there were wide divergences in the
performance of the individual cities,” RP Data research director
Tim Lawless says.
“After a big surge in home values in
Melbourne over 2009 and 2010, the 2011 softening continued
with dwellings down 0.3 per cent for the month.”
Sydney values slumped 0.6 per cent in September but are the
strongest nationally, up 2.9 per cent, while Hobart values
dropped 4.8 per cent.
Bright says it is not unusual for people to be asking prices 10 per
cent above their true value to try to cover the cost of their
“One tell-tale sign that a homeowner has overcapitalised is when
you ask the sales agent how the vendor came up with the asking
price,” he says.
“The sales agent quotes the amount the owners spent on the
renovations and the price the property was worth prior to the
renovations, adds the two together and there’s the expectation to
sell the property at that price.”