As published by Herron Todd White Valuers
Renovation has always been popular in the Toowoomba region, particularly in uncertain financial times when owners possibly feel safer investing funds into their own property rather than buying or building a new property. With the large supply of housing currently at hand and some cases of reduced prices, owner-occupiers could however consider buying into a newer property instead of renovating.
The Toowoomba renovation market is dominated by owner-occupiers. The costs involved in renovation work don’t always add up to bring in reasonable returns on capital for investors. There is also usually little tax incentive, with most renovation work falling under capital works.
The market for potential renovation projects is quite broad across the Toowoomba area. Older character style homes in the circa 1900s to 1940s range have always seemed popular to buyers looking for a renovation project. These homes predominantly are character timber with detailed decorating throughout, high ceilings, timber floors and VJ walls. Such a property can potentially make good returns if it is purchased for the right price, however these are difficult to find. The majority of this product type will be found in close proximity to Toowoomba’s CBD in areas such as south, east and north Toowoomba and Newtown.
Further out from the CBD, Centenary Heights, Rangeville, Mount Lofty and Harristown have also seen many renovation projects. The majority of this renovation work has been carried out on circa 1960s to 1980s houses of chamfer on brick and brick veneer, timber floors and slab on ground, generally more standard type housing. Typically, areas further from the CBD are characterised by modern housing. As a result there is less demand for property to be renovated.
There tends to be a general perception that if a dwelling is dated, particularly internally, then it is in need of renovation work. The general market has higher expectations of living conditions now than in the past. These expectations could be a result of the exposure we all have to the building and renovation reality TV shows. This could be factoring in the thought process of a potential buyer inspecting a property listed for sale. The right price would have to be paid for a property to then renovate without over capitalising. Care needs to be taken when considering the true costs and time it takes to renovate – it could be argued that this is portrayed inaccurately on the television.
The most common renovation works carried out on a Toowoomba house are new kitchen, bathroom and laundry, floor coverings, light fittings, internal and external paint, rendering external walls if applicable and outdoor areas such as decks and landscaping. With the amount of new unit product that has recently come to the Toowoomba market, renovation work on an existing unit is not a viable option for investors or owner-occupiers. The unit market has generally seen a reduction in prices and yields. It is becoming harder to recoup funds spent on a renovation project. Even the renovation of a unit in a more sought after location where infill unit development is present could prove risky to pursue. The current Toowoomba market in most cases does not reflect large gains on renovation projects. Some locations and property types may in fact show a loss, some may break even (dollar for dollar) and some may show small gains. There are many factors contributing to this such as holding costs, transfer costs and labour costs. For example, a property of average dated condition in south or north Toowoomba can be purchased for circa $250,000. If $70,000 is outlaid to renovate the property, there is a good chance that the final market value could fall within the $320,000 to $340,000 range. This does not take into account the buying, holding and selling costs. Overall, it is difficult to find a renovation project in Toowoomba to make substantial gains.