Reno loans up in tight market

Issues affecting the state’s housing sector are showing signs of easing, but it remains a challenging time to build a new home.

Build times have blown out to two years in some cases, while a shortage of trades has led to limited builder availability.

Those in the market for an established home have little choice, with Real Estate Institute of Western Australia figures revealing a record low 3,648 listings at the end of December.

In a balanced market, when supply and demand are relatively stable, about 13,000 homes are available for sale in WA.

REIWA data also shows that houses are selling in an average of 10 days, which is nine days faster than a year ago.

Additionally, Perth has about 0.7 per cent rental vacancy.

These factors have led to an increase in renovation work for WA homeowners, as people struggle to find what they want on the market or are reluctant to build new.

Australian Bureau of Statistics data for the three months to November 2023 shows the value of loans issued for renovations in WA was $145 million.

This represented a 22.2 per cent increase on the previous three-month period and a 51.3 per cent uptick than at the same time in 2022.

Summit Homes Group is among the builders reporting an increase in demand for home renovations.

The company recorded a 30 per cent rise in enquiry levels for people looking to upgrade their homes, with a total of 535 renovation enquiries this January.

This compared to 412 in the prior corresponding period.

In the first two weeks of January, more than 241 customers had enquired about renovating their home, an average of 16 enquiries a day compared with four/day last year.

Summit Homes general manager of renovations, developments and granny flats Adrian Sutton told Business News it was the largest lift in renovation enquiries he had seen.

“I’ve been at Summit for seventeen years, but in the renovation team for two and a half years … [this is] definitely the biggest uptick I’ve seen,” he said.

“[For] a lot of staff who have been in this division longer than me it’s the biggest uptick they’ve seen as well.”

Mr Sutton said population growth, including from international migration, was one of the factors leading to an increase in demand for renovations.

Summit is receiving interest from people who have newly purchased a property but are seeking to change it.

“Previously, it has been a lot of existing homeowners who want to do upgrades,” Mr Sutton said.

“Now, there’s an increase in enquiries from people newly buying houses, whether they’re interstate or international.

“People are more inclined to do that … even when they put an offer on it, prior to settlement they’re contacting us and saying, ‘we’d like to do a renovation’.”

Mr Sutton added that many clients were seeking to increase the value of their properties via renovations, with some suburbs particularly attractive.

“You could’ve bought a three by one in Mount Lawley in August 2021 for the mid to high $800,000s. For us to do a renovation on that, a second storey addition, you’d be looking at $400,000,” he said.

With a four-bedroom home in Mount Lawley fetching at least $1.4 million, renovations can deliver substantial capital growth, based on those numbers.

Mr Sutton said the fact that renovations often required fewer of the trades needed in a new-home build added to the appeal of extending an existing property.

Housing Industry Association executive director Michael McGowan said he expected the popularity of renovations to continue into 2024.

“With the acute shortage of rental properties, and new and established homes available on the market, homeowners are turning to renovations to improve or expand their existing homes,” he said.

“While availability of new homes remains restricted and the high interest rates continue to impact borrowing and cost of living, we would expect the renovation market to remain buoyant throughout the year.”