Renovating for Capital Growth in the 2024 Market
As the 2024 property market continues to take unprecedented turns across the board, the question of “how to maximise profit” in this market plagues sellers, flippers and investors alike. From boombing Brisbane and Perth, to sluggish Sydney and Melbourne, the tried and true formulars for calculating sale prices and short term property market projections are again, rewriting the rule books.
Perth and Brisbane taking the lead
Traditionally footnotes in industry stories focused on Sydney, Perth and Brisbane continue to see above expected growth in the most recent property market results. For flippers and sellers, the key to a highly profitable renovation is using market data to estimate your potential profit, and then maximising the sale price by calculating the ROI on renovations. So let’s look at the key indicators for a profitable sale:
1. Time on Market/Demand2. Potential Rental ROI
3. Property Market Forecasts
The Perth property market, like Brisbane, is bucking the trends we’re seeing in Sydney and Melbourne, and showing little sign of slowing.
What the traditional rule book says
Spend big for big ROI. In the current market, where house prices could be peaking, or they could continue to grow, in a market plagued by housing shortages and inflated demand, how much ROI potential is there on the major renovations deemed essential in the past? Central air, new kitchens, extensions, additional bathrooms, decks – the big ticket items once deemed the “smart money” for ROI, are now the big risk items.
Conservative Renovations
“Despite what we’re seeing in the US and EU, where big ticket renovations are still key to shifting sluggish properties, here, the market forces are so strong that major renovations run a very serious risk of over-capitalisation” said Property Market Forecaster at Queensland Property Experts.
Preparation time in a fluctuating market
Before you put your home on the market, it’s important to understand today’s market conditions and how this might influence property value. Right now, the property market is changing rapidly which means that prices can be a little unpredictable. Recently, property prices have been on the rise. But trends can fluctuate depending on current affairs and where your property is located. Renovation remains the best way to ensure capital growth, but it’s a good idea to stick to a budget as you make changes to your property. This way, your finances will be protected while you work to generate increased earnings.
Minimalist Approach Returns Good ROI
Both the Brisbane and Perth markets are favouring smaller renovation jobs with significant visual impact. The old staples, like landscaping, house painting, and added storage offer a safer calculated return on renovation investment. In one example, the potential return on investment in one of Perth’s premium suburbs demonstrates how a safer choice is the new “big spend”.
A Peppermint Grove palace with views for miles, will still fetch more than $3 million, even if it’s painted in graffiti. In reality though, a buyer with $3 million or more in their pocket, expect quality, contemporary interior design. The median sales price for a four-bedroom home in Peppermint Grove is currently $3.4 million. If the property has an outdated paint job, let’s be generous and say it may only impact the value of offers by 2%. That’s $68,000. If the cost to paint the home is $30,000, the return on investment exceeds 200%.
When you paint an investment property, you can make the most of incredible capital growth opportunities. A poor or tired-looking paint job could knock down your property value, while a shiny new look could foster emotional connection among buyers, encouraging a sale.
Cheaper than most major structural renovations, painting offers excellent return on investment. By striving to achieve a superior finish and modern style, you can boost your property’s perceived value, obtaining a higher rent or sale price when it goes to market. Whether that market is stable, burgeoning or in decline.
