Perhaps due to our latest obsessions with popular TV shows like The Block and House Rules, many Australians are now harbouring the dream of perfecting the renovating experience with their own homes, instead of buying new.
There are both advantages and disadvantages to both when considering a change, however there are also processes which are often overlooked when weighing up which option may best suit your needs. Are you better off buying a near-new or newly renovated property, or is journeying down the road to renovation in you midst? There’s a lot to consider — so here’s what you need to get started.
Consider Your Cash & Overcapitalising
When purchasing a renovator, the first step is to avoid the potential of overcapitalising on your property; that is, when the cost of the renovation outweighs how much value it will add to your property. After all, the last thing you want is to be left out of pocket! A well planned and executed renovation can add around 10% to the original value of your property, according to the national average from the ABS¹. To put this into perspective; if you purchased the original home for $400,000, spent $50,000 on renovations, and sold the property for $440,000 (based on the average added value of 10%), you’ll be left $10,000 in the red. However, don’t let this dissuade you — use it to your advantage, and be cautious of what you’d like to achieve, and what you’re willing to invest.
Similarly, when buying a new or newly renovated home, be sure not to overspend. If one particular property has caught your eye, and you’ve consequently fallen in love, quite often your emotions can take control leaving you to offer more than it’s worth. To make an informed decision, or to know your limit when bidding at auction, study other comparable properties in the area.
The Government is Here to Help
As you may be aware, first home owners are entitled to receive a first home owners grant from the Queensland Government, provided that you are eligible. The Government has enforced a set of criteria determines whether you’re eligible— these include new home verifiability, age restrictions, and prior living situations. Of these rules, it is most pertinent to check that the home you are moving into, or building from new, is classified as a new home. Under Queensland law, a new home is a brand new dwelling (e.g. house, unit, duplex, townhouse, granny flat built on a relative’s land) that has not been previously occupied as a place of residence or sold as a place of residence².
Don’t Forget the Stamp Duty
As stamp duty rates continue to rise in Queensland and cross the country, this can be a major contributing factor towards your decision. These transfer duty rates for Queensland apply to transactions involving dutiable property, including transfers of commercial or investment property. The base cost and rate varies on the market value, with cheaper properties attracting smaller rates to pay. For example, the duty for properties between $75,000 to $540,000 is $1,050, plus $3.50 for each $100, or part of $100. For properties between $540,000 and $1,000,000, the duty increases to $17,325 plus $4.50 for each $100 and part of $100³. This is a considerable jump between prices, considering a brand new home will likely cost more than your standard renovator.
However, as this is your first home, you may be eligible for a concession on the stamp duty payable for properties up to $550,000. For instance, let’s say you decide to buy renovator home worth $450,000. Using the transfer duty calculator provided by the Queensland Government, no duty is owed as the concession amount reduces the dutiable cost completely. Buying a home worth $530,000, however (for a new, renovated home), will result in a $6,300 duty payable — another factor to strongly consider when evaluating the options for your first home.
If you’re thinking of buying your first home home, talk to the experts who know best. Place Estate Agents employs quality people who can help you get this process started, and point you in the right direction towards achieving your dream result.
By Joe La Spina // Place Estate Agents