Property buyers shunning homes in need of renovation

Do you ever look at a recently sold property and think “who would be crazy enough to pay that price?” only to then look at another property and think, “Well, in comparison to that other property, this went cheap.”

Chances are, if you are referring to homes that are selling for top dollar they are those that, as the Americans say, are “turn-key ready”.

Homes that are ready to move into and don’t require further renovation works are proving very popular with buyers right now.

Agents are finding homes that sell faster and for higher prices are those buyers can move straight into.

They also described how properties that require work are in less demand as buyers are being pickier with their critique of the home. Whenever they sell homes that need work, they take longer to sell and buyers are far more cautious because of the increase in the cost of materials.

Agents also observed that homes that present well have more online traffic and people are staying longer on the advertising websites to look through the homes. Homes opens are attracting high number of buyers who are willing to pay a premium for these types of properties.

Every time we turn up to a home open there are about 40 or 50 groups of buyers.

- Michael Peters, prospective home buyer

Buyers are realising there is a real lack of stock on the market for well-presented homes that don’t need much work.

Michael Peters, 34, from Mortdale in Sydney’s South, recently sold his three-bedroom duplex and is looking to move into a freestanding four-bedroom home in Oatley with his family.

“We thought, because of the rising interest rates and slowing down of the market, we’d be in with a real chance to get the perfect home, but every time we turned up to a home open there were about 40 or 50 groups of buyers and then within a week it was sold for a price above our budget.

“We were shocked; the demand for good homes is very strong”.

When asked if he wanted to buy a home to renovate, his reply was quick and adamant.

“No way! Not now, with the increased cost of construction.

“We don’t want to borrow money for a renovation; I’d rather pay a little more for a renovated home and move my family straight in as I honestly don’t want the hassle of renovating.”

Unrenovated homes heavily discounted

It seems that he isn’t the only one hesitant to renovate. Potential buyers only see dollars sign needing to be spent on unrenovated homes due to the high construction costs that come with such a project.

House prices rose nationally for the first time in 11 months in March, while the chronic rental crisis continues.

This has been largely unexpected and defies the predictions of many economists.

The main catalyst for the price increases has been a housing supply shortage for renovated or unrenovated properties.

Very strong auction clearance rates are fuelling FOMO (fear of missing out) among buyers not wanting to miss out and creating a sense of urgency when it comes to buying homes quickly for fear prices will go up further if they miss out.

Seller confidence is low and agents find that those thinking of selling are hesitant because they fear they won’t be able to buy their next property soon after selling.

Those that are selling are largely only doing so out of necessity.

This is eerily similar to the buyer and seller behaviour of the now infamous record-breaking property market of 2021.

For home owners thinking of selling, it’s important they ask themselves, what can I do to safeguard my property against a price reduction when putting it on the market?

Buyers are heavily discounting homes based on the amount of work that needs to done. The discount is over and above the actual renovation cost.

For instance, if a home is expected cost $100,000 to renovate, potential buyers are factoring in a reduction on the asking price of around $150,000 to $200,000.

Small expense for big savings

So, if you are selling, look into some minor renovation works you can take on yourself to make your home more marketable and appealing to more buyers.

Small changes could include increasing the kerb appeal of your home, such as sprucing up the landscaping with fresh mulch, established plants and a clean, freshly cleaned driveway.

Don’t underestimate the power of a fresh coat of paint (inside and out), new flooring, updated lighting and modernised window finishings can have on a property. If it’s one less job a potential buyer needs to do themselves, it could mean a greater chance they won’t discount your home by as much.

If you’re looking to buy a home in the current market, it’s still worth considering an unrenovated property if you want to pick up a bargain.

You’ll have less competition, greater value-add potential and the opportunity to renovate a home to your own personal taste and style.

But be warned, in an unpredictable construction industry climate, anything can happen, from budget blowouts, to delays, to building companies going into liquidation.

The romance of renovating and flipping homes should be left to the polished TV shows because in reality, it really isn’t for the faint-hearted.