By Kate Burke
Sydney home buyers are flocking back to fixer-uppers as rising property prices, limited choice and easing construction pressures shift demand back to homes in need of work.
Dated houses, rundown properties, and even completely unliveable homes have become increasingly popular, in contrast to last year when buyers were shying away from renovation projects in favour of A-grade properties to avoid increasing build costs and time-frames.
The shift has seen a spike in buyers competing for homes ready for a renovation or rebuild. Thirty buyers turned out to compete for a five-bedroom 1970s home in Hornsby Heights last month, sending the price to $1,506,000.
A dozen buyers registered to bid on a fire-damaged home in Ashbury that fetched $2.3 million and another 10 on a rundown Newtown terrace, where the hallway passed through the bathroom, that sold for $1,516,000. A Paddington terrace in disrepair drew eight registered bidders and sold for $3.85 million.
While most properties have benefited from increased buyer competition – off the back of lower supply and rebounding prices – fixer-uppers have seen a dramatic increase, said BresicWhitney chief executive and auctioneer Thomas McGlynn.
“We’re seeing a massive shift to renovator’s delights ... interest in houses in need of renovating, or that need a rebuild or significant investment is back at pre-COVID levels,” McGlynn said.
“Properties that need to be fixed up have always been very popular ... it’s only really in the last three years that [the demand] has probably been lower.”
Ray White chief economist Nerida Conisbee said renewed interest had been supported by a lack of stock, but also easing construction pressures.
“It’s easier to get a builder now than last year, and the big one is [the inflation of] material costs has come down. A lot of that heat in the construction sector has dissipated, and even furnishing a home is now easier … with discounting by furniture retailers,” Conisbee said.
The cost of building materials increased another 0.6 per cent last quarter, the smallest quarterly increase since the end of 2020, the latest figures from the Australian Bureau of Statistics show. That’s down from a peak of 4.3 per cent the previous year.
Total building construction prices rose 1 per cent, down from 3.8 per cent quarterly growth the previous year.
Conisbee said rising prices and reduced borrowing capacity were likely pushing more buyers towards lower quality homes.
“There’s also a recognition that prices are back on the move [up], people are a bit more anxious to get into the market before it gets away from them [and will buy what they can get].”
Meanwhile, the perceived risk of overcapitalising on a fixer-upper has eased from last year, when property prices were falling and construction costs were climbing – which also reduced the appeal to flippers, whose profit margins had already been diminishing before the market downturn.
McGlynn agreed the recent uptick in prices, and some significant results for fully renovated homes, had given potential investors and renovators more confidence to tackle a fixer-upper.
Such properties were particularly popular among first home buyers and younger upsizers, who may have more constrained budgets and were searching for homes they could slowly transform over time, McGlynn said.
“And though investors are not hugely present in the current market … we are seeing rising investor interest in these properties, they’re not looking for rental yields, they’re looking for capital gains, with a short turn around.”
He suspected strong results and buyer interest would drive more property owners to the market in the coming months.
Belle Property Lane Cove’s Patrick Lang said more buyers were reverting to properties with the potential to extend or rebuild, to try to avoid competition for new and fully renovated homes – which soared in previous years as buyers tried to avoid the hassle and cost of renovating.
“[More buyers are trying for] the worst house on the best street, it’s the great Australian dream to find a home to add value to,” he said, but buyers were still wary of derelict properties in need of a lot of work.
While stock shortages meant most homes were ticking along well, this could change as more homes hit the market in the coming months, Lang said.
“As prices are up, fixer-uppers become more popular, but if prices stagnate because of more stock in the next few months then it is going to need to be a good fixer-upper option … a flat block, with good zoning etc … if it’s on a slope [or has other drawbacks] it won’t do as well.”
He recently listed a three-bedroom Lane Cove home, with potential for a renovation, extension or rebuild, that is expected to fetch north of $3 million. By comparison, a three-bedroom house two doors down sold for $2.53 million last August, though it was on a smaller block.