Buyers' market - but risks for renovators

By Terry Ryder, 16th August 2011

Residential property presents a buyers’ market and a winner for smart investors. It sounds like a pitch from real estate agents but this message comes from Archicentre, the building advisory service of the Australian Institute of Architects.

Archicentre says the lack of competitive bidding at auctions, low sales rates and many vendors facing mortgage pressure adds up to market strongly in favour of buyers.

But, it says, it is not without traps. Archicentre State Manager ACT & NSW, Ian Agnew, says this is particularly true for people buying to renovate. He says a “renovator's dream” can turn into a money pit rather than a profit-making investment (there’s plenty of research showing that many people fail to achieve the hoped-for profits with a buy-renovate-and-sell strategy because costs are higher than they thought).

"While it might look easy on TV renovation programs, which have created an increase in people interested in renovation and improving their homes, the reality is that buying a home for a successful renovation requires planning and a thorough property assessment," Agnew says. "Choosing the right property in the beginning is the key to success."

Agnew says it’s critical to assess the fundamentals of the property such as the footings, stumps, wiring, roofing and plumbing, which can be expensive if they need replacing or major repair.

"The floor plan of the home is also a major deal maker or deal breaker,” he says. “If it supports the type of renovation you want to carry out, it will save a great deal of money. If it doesn't it could mean you could be over-capitalising on the renovation and leave no profit or worse lose money.

"One of the key issues to thoroughly check before purchasing a property for renovation is the local council's planning or development controls to ensure your renovation will be approved as it could be subject to heritage overlays, tree removal restrictions, height restrictions and restrictions on the size of the building footprint."

Agnew says it’s always good to find a home with a north-facing back yard, which provides the opportunity to situate the bedrooms towards the front of the home whilst opening up the back of the building as an open plan living area that captures natural light and warmth from the winter sun.

"A flat allotment is also easier and cheaper to work with as sloping lots can require expensive excavation and add to building costs through the need to use scaffolding."

ENDS

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