The fixer-upper demise: Just 11% of first home buyers plan to renovate immediately
First home buyers are more likely to delay renovations than they were a year ago, according to new research from Finder.
According to Finder's First Home Buyer Report 2022, which surveyed 1,001 first home buyers in Australia, 4 in 5 first home buyers (80%) are buying with the intention of renovating at some stage.
The research found 1 in 10 (11%) plan to renovate immediately, with a further 32% planning to renovate within 12 months of buying.
However, Finder data shows the number of first home buyers who plan to renovate immediately has halved from 22% in 2021.
Sarah Megginson, money expert at Finder, said the pandemic saw a rise in renovations as lockdowns meant we had a lot more time on our hands.
"It was a combination of low interest rates, which made it cheaper to borrow money, and less competition for our discretionary income as travel was largely off the table.
"Australians invested money into making their homes more comfortable and to increase the value of their assets.
"The removal of lockdowns in combination with construction costs soaring, supply chain delays and many interest rate hikes is likely to see the renovation boom come to an end."
In 2020, the value of residential alterations grew by 11% and in 2021 it grew by a massive 33% to reach $12.2 billion.
However, in February this year, the value of home renovations decreased year-on-year for the first time since May 2020, an indication the renovations boom is subsiding.
CoreLogic reported construction costs increased by 10% over the 12 months to June 2022, the highest annual growth rate on record outside the introduction of the GST.
Megginson said there were a number of factors at play.
"The cost of construction materials continues to soar – this coupled with supply chain shortages as well as rising fuel and electricity prices is having a big effect on the property market.
"Australians are dealing with immense financial pressure at the moment, meaning planned renovations might fall off the to-do list for now."
Finder research shows the majority of those planning to renovate will use part of their savings (69%) to fund it and just over a quarter (27%) will take out a personal loan to cover the costs.
Almost 1 in 5 (19%) will add it to their mortgage and 18% intend to use their credit card.
Megginson said topping up your home loan is a relatively low-interest way to pay for renovations.
"That's because home loan rates are much lower than interest rates on personal loans or credit cards.
"Accessing equity is a fairly simple process and it means you won't have to apply for an entirely new loan.
"However, if you're a new homeowner, you won't have much equity built up and you may need to pay lenders mortgage insurance to borrow from your mortgage if you have less than 20% equity.
"Personal loans can also be reasonable options if your renovation is small and you're confident you can manage the additional repayments," Megginson said.
Gen Z (83%) and millennials (82%) are more interested in buying with the intention of renovating, compared to 72% of gen X.
Those from Western Australia (85%) and New South Wales (84%) have the greatest interest in fixing up their home, compared to 77% of Victorians.
Planning on renovating your property? A renovation loan can cover your costs and boost the value of your property.