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Property investors warned not to over capitalise in renovations



Expenditure on home renovations still remains strong in Perth despite the subdued economic conditions currently being experienced in Western Australia.

For example, the latest ABS figures on building approvals show that spending on home renovations in the inner city suburbs of Perth topped more than $100 million last financial year.

Low interest rates were encouraging more property owners to renovate their homes with interest rates now falling below 4 per cent.

Limnios Property Group is finding that property owners are taking advantage of these record-low interest rates to add value to their home through home renovations especially in inner city areas such as North Perth, Mount Lawley/Inglewood, Leederville, Mount Hawthorn and East Perth.

For example, during the 2015/2016 financial year property owners in the Mount Lawley/Inglewood area alone spent nearly $13 million on home renovations.

We are also finding strong home renovations activity in fringe city suburbs covering the City of Stirling.

Overall, the City of the Stirling was the most popular area in Perth for home renovations with $53.4 million being committed in home renovations in this near city location.

Property investors have also been active in the inner city/near city home renovations market as they have sought to boost rental returns through strategic improvements to the properties they have bought.

Greater competition for tenants has also encouraged property investors to upgrade their properties because poor presented rental properties in the current rental market will be overlooked by tenants and could be left untenanted for several months.

While home renovations can be a good long-term investment, property owners need to be careful not to over capitalise their homes.

The reality is that property prices are under pressure and anyone who undertakes an expensive renovation in the current property market may find it difficult to recover this expenditure if they were forced to sell in the short term.

If you plan to undertake a home renovation in the current property market then it is wise to take a targeted approach and concentrate on important areas that require limited expenditure.

The presentation of a property for sale is an important issue for prospective buyers and areas such as internal paint, floor coverings and window treatments are very important.

Even better quality light fittings can improve the overall presentation of a home. A few hundred dollars spent on garden care can also make the property much more attractive to tenants.

With a limited budget, a property owner can substantially improve the presentation of the home which will make it easier to find a buyer.

The purpose of targeted renovations is to ensure that the property appeals as many prospective buyers as possible if you plan to sell your property in the near term. It is important to remember that your property is competing against other properties for sale in the local area and an attractive presentation of the property will encourage more buyers to inspect your property.

Irene Limnios

Irene Limnios

Limnios Property Group has specialised in the inner-city Perth property market for over 40 years. During this period, Limnios Property Group has emerged as one of the most progressive and innovative real estate companies assisting both developers and property investors to achieve their goals through highly professional advice backed by an unparalleled depth of experience in the inner-city market.

Property investors warned not to over capitalise in renovations
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