Despite the climb in interest rates, Australia’s property market has seen an impressive 8.9% increase in national values over the past year, CoreLogic data showed.
This growth is partly driven by the anticipation of the Reserve Bank’s potential rate cuts, encouraging buyers to act swiftly to capitalise on future price increases.
George Cherchian from James Chase Buyer’s Advocacy highlighted the fear of missing out (FOMO) as a significant catalyst for the heightened demand for fixer-uppers.
“There’s been a surge in buyer demand, primarily driven by the belief that now is the opportune moment to buy, before the Reserve Bank potentially lowers rates later in the year,” Cherchian said. “This has reignited FOMO with a vengeance, pushing buyers towards even the most neglected properties.”
A notable case was a semi-detached house in Annandale that fetched $1.31 million at auction, far exceeding its guide price.
The trend is further supported by a stabilisation in construction costs. The Cordell Construction Cost Index reported a 2.9% increase in construction costs for 2023, the smallest annual rise in over a decade. This development makes the prospect of renovating more appealing to buyers looking to add value to their investments.
“With construction costs normalising, the idea of renovating a rundown property has become more palatable. It's seen as a viable way to add value,” Cherchian said.
Despite the allure of fixer-uppers, Cherchian advised caution, noting that renovation projects often come with unforeseen costs and complications.
“Costs can escalate quickly, and there are always unforeseen challenges that can turn what seemed like a good deal into a financial burden,” he said.
He encouraged prospective buyers to thoroughly assess the risks and costs associated with renovations.
“The best investment decisions are made with a clear understanding of the risks and opportunities involved. So do your homework,” Cherchian said. “Understand the full scope of what you’re getting into, including renovation costs and potential overruns.
“Don’t just jump in because of FOMO. Sometimes waiting for the right opportunity can be more beneficial than rushing into a project with so many unknowns.”
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