Government grants, falling rates and economic woes - there are a lot of pitfalls in the property game, writes David Potts on Fairfax’s Business Day.
Potts asks the question many of us might ask in these uncertain times: “If you already own your home and want to upgrade, is renovating or buying the best option?”
“The short answer”, he says, “is renovating. The long answer is it depends on where you are and where you would like to buy. The closer you are to the city, the less danger there is of overcapitalising.”
Potts cites the example of a $250,000 renovation on a $1 million property, and says it will probably add up to another $1 million in value over time. That’s likely to generate a bigger capital gain than buying a new house for the same amount in the outer suburbs of Sydney or Melbourne, especially as the trend toward living in the inner city by Gen-Y and Gen-X intensifies, he writes.
His advice though is that in calculating whether a renovation is going to be worth it, don’t forget to take into account the extra interest you’ll be paying. Also get the opinion of a valuer. Above all else though, don’t forget it’s the dirt rather than the building that appreciates over time.
“The renovation might improve your lifestyle but the real capital growth will come from where your property is located,” he says.
The LOCATION CHECKLIST gives us the usual suspects:
- Vacancy rate in area
- Jobs in area
- Population growth
- Infrastructure
- Transport
- Schools and social amenities
- Health facilities
- Affordability
- Size of land
- Proximity to city
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