by Mark Wilson from Architects Black and Wilson Pty Ltd.
Is it better to improve my existing house or move to a better one?
I recently happen to view an episode on television comparing the option of selling and purchasing a better house against upgrading the existing with extensions to make it your dream home.
After the obligatory research of the paper and real estate web sites for the potential sale price of your existing and the likely purchase price of your “dream home” the figures need to be reviewed.
The MOVE Option.
More often the not, the true value of the existing house is overestimated because of all the laborious ‘improvements‘ that have been made to it over the years – some of which may add little to the sale price and some may even detract from the true ‘market value’ of the property.
Further allowance has to be made in the budget upgrade figures for:
I. Miscellaneous costs like Building Inspections,
II. removal costs,
IV. Real Estate Agent’s commission for the sale of the existing property
V. Stamp duty on the new purchase
Inevitably the “dream home” ends up costing several thousand more than expected.
The IMPROVE Option.
This option is a little harder to estimate accurately.
Without complete plans any estimate for alterations is likely to vary by as much as 25%.
This will be due to two factors:
- there may be hidden problems such as rot, termite damage or services issues
- you will invariably spend just a little more on fixtures and fittings that you may never purchase again for many years.
In the television case the existing house was valued at $450,000 and the dream home $650,000.
Agents fees – $10,000
Conveyancing – $2,000
Stamp Duty – $35,000
Miscellaneous removal etc – $2,000
New House additional cost – $200,000
Total – $249,000
Council fees – $6,000
Rental during alteration – $6,500
Design – $10,000
Insurance – $2,000
New alterations – $180,000
Total – $204,500
Interestingly for this television example the move option came in as the better option than the renovation. However we must remember this was one case study and a few other things need be considered.
Firstly this case study was in Victoria and the most significant issue was the Stamp Duty. In Victoria Stamp Duty is $10,000 more than most states and $20,000 more than it is in Queensland. This would reduce the difference in Queensland to around $27,000.
Secondly I believe the renovation costs were underestimated. At the end of the day all quotes are meaningless unless they are by someone prepared to sign a contract for that amount. Personally I would not have been prepared to estimate the renovations as proposed for anything less than $200,000 – $210,000. These more realistic figures make the two options almost exactly the same.
The fact remains that the market prices new homes and renovated homes are usually valued by the market at near to their intrinsic value. The real difference is your renovations will be brand new and to your taste. In addition possibly the main reason for considering a renovation is because you love the area or even the street. So at the end of the day the decision may not be totally financial.
Further you can bet that once the initial romance period is over you will begin to notice things you no longer love about the upgrade house and you will invariably need to spend additional money altering it anyway. So you will either have to budget for them from the start or put in more sweat equity (labour) again.
In the end two things are clear:
- Firstly you need to work out what your real requirements are. The team at Build in Brisbane can help you with this. We have Architects, Surveyors, Builders, Town Planners, Building Certifiers, Engineers, Interior Designers, Landscapers and Occupational Therapists all here in the one place.
- Secondly despite worldwide polls that find Melbourne and Sydney are the best places in the world to live I find it difficult to believe it is a no brainer if you are going to build then Build in Brisbane.
If you like this blog and would like similar comparisons say between a new build or something else feel free to let us know. You can contact us here.