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This was published 4 months ago
Young families trying to crack the housing market are paying top dollar for run-down homes, as for many it’s their only chance of owning a decent slice of Sydney land.
What once was an investor’s playground is becoming the realm of owner-occupiers, agents report, as soaring house prices – coupled with rising construction costs – means the economics of snapping up a ‘renovator’s dream’ in a bid to renovate, knock down or flip it is less lucrative.
Even homes deemed unsafe to inspect are not deterring desperate upgraders. Credit:
Instead, experts say investors are being outbid by desperate owner-occupiers going hell for leather for original houses, despite having to sink more money in down the track in an effort to upgrade rather than be priced-out altogether.
“People’s budgets are quite thinly stretched,” CoreLogic’s head of research Tim Lawless said. “If [the house] is well-located and fits the budget, it sounds like a good option for a lot of buyers who may not be able to afford a property in the same location that is of higher quality.
“Buying a home that needs renovations comes with a lower price tag. Putting the renovation off to a later date or doing it in bits and pieces might be one of those strategies.”
Buyers seem undisturbed by purchasing at the top of the market, as many bank on the fact it is a long-term family home, he added.
“The old saying is not timing the market but the time in the market. Chances are, over a long period of time, the ups and downs will even itself out. That’s what we’ve generally seen historically.”
While investor mortgages are rising, Mr Lawless said it’s unlikely that they are shoring up poor-quality homes that need a lot of work.
“Flipping a property is challenging at the best of times, but at this stage of the market you’re buying at a high price and facing high construction costs and larger transactional costs. I can see how flipping is less likely. I think that would be the exception rather than the rule.”
Sydney owner-occupiers are faced with the double-whammy of not only buying at the peak of the market but also coming up against record construction costs and supply shortages that see many homeowners delay renovations, time frames blown out and long wait times for builders.
National construction costs increased 7.3 per cent over the 2021 calendar year, the fastest annual pace since 2005, according to CoreLogic’s Cordell Construction Cost Index.
But for many owner-occupiers it’s worth the hassle and sometimes the only option to make the leap into the housing market when the price gap between units and houses has more than tripled in almost three decades.
12 Asquith Avenue, Rosebery sold for $3.3 million to a young local family prior to auction well above its $2.8 million guide.Credit:
In Rosebery, a young local family bought an original three-bedroom house at 12 Asquith Avenue for $3.3 million prior to auction.
The property, which had a price guide of $2.8 million and developers eyeing it for its potential, was snapped up for its 626 square metres.
“They recognise the local area is up and coming, and it has tremendous growth potential,” Roger Wardy, of Ray White Touma Group, said.
“They are planning to hold on to it for now and eventually knock it down and build their future home.
“They see the long-term value in it. It’s not any short-term purchase. Even if they pay a little bit extra now, 20 per cent growth in the next 10 years … you’re still half a million dollars better off. The capital growth is going to surpass whatever you’re paying.”
Mr Wardy said Rosebery was three to four years behind Kensington, which is now clocking $6 million sales.
In Strathfield South, another young family bought a three-bedroom house at 139 Coronation Parade for $1,786,000, outbidding builders and experienced renovators.
Guided between $1.4 million to $1.5 million, the property was deemed unsafe, preventing internal inspections. But that didn’t deter interested buyers keen on scoping out the 446-square-metre block.
“A lot of people can get to that next-level home cheaper if they buy and build themselves … that’s the perception. It doesn’t always work out that way,” Forsyth Real Estate’s James Snodgrass said. “That’s the way for young couples to try and get ahead in a hot market.”
Mr Snodgrass said builders were playing a number’s game and will only bid to a certain figure at auction.
“It’s a different ball game. It’s more of a business transaction rather than an emotional transaction.”
The six-bedroom property at 9 Wolfe Road, East Ryde sold for $2.65 million to a Hunters Hill family who want to build their dream home.Credit:
Priced-out Hunters Hill buyers bought a six-bedroom house for $2.65 million in the bridesmaid suburb of East Ryde.
The property, at 9 Wolfe Road, was as original as they come, but the successful purchasers bought it for the valuable 860-square-metre land holding, on which they hope to build their dream house.
“We’re getting a lot of buyers from Hunters Hill, where land is at least $1 million more expensive,” McGrath’s Chris Pennisi said.
“The underbidders were developers looking to build duplexes,” he said, adding that those who look for an immediate sale after construction were more conservative with their offers.
Many builders or investors are wary of over-paying, with forecasts the market will soften in the next 12 months or so, Mr Pennisi added.
Even in suburbs further afield from the CBD, young families are paying well above price guides for run-down properties they do not intend on renovating for some time.
Even properties in suburbs further afield from the CBD like 61 Hector Street, Sefton are being bought by buyers who plan to rebuild in the future.Credit:
In Sefton, a young couple expecting a baby bought a three-bedroom weatherboard house at 61 Hector Street for $1 million, some $100,000 above its guide.
“The thing is, if you don’t buy this one you have to pay more for something a little bit better,” Joe Fares, of LJ Hooker Chester Hill, said.
The young buyers of 21 Rosehill Street, Parramatta outbid 27 registered bidders, including developers. Credit:
In Parramatta, another young couple paid $1,728,000 for a three-bedroom house at 21 Rosehill Street, outbidding 27 registered buyers, including developers. The 702-square-metre block was guided at $1.35 million to $1.5 million.
“They are not sure what they’re going to do with the property at this stage. They only saw it on the day,” Sandra Aquilina, of McGrath Parramatta, said.
“The value of that property was in the land.”
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