Are fixer-uppers back in favour?

The past twelve months have been a masterclass in just how quickly the economic mood can turn, and how fast that ripples through to property markets.

It wasn’t so long ago that we were all pinning our hopes on a rate cut to round out 2025. Then, almost in the blink of an eye, inflation reared its head, and people were suddenly whispering about a looming rate rise. Three 25-basis-point increases later, the debate is underway on “what next?” for borrowers. Throw in conflict in the Middle East, a federal budget full of surprises, and then a tentative easing of those same Middle East tensions, and you’ve got yourself a proper hurdy-gurdy of forecasting. Predicting where things head has rarely been trickier.

But through all that noise, one trend has been remarkably consistent since around 2021… the relentless march of construction costs, and the timing blowouts that have come with them. For anyone planning to build or renovate, it’s been a tough few years.

The flow-on effect is that buyers have been paying eye-watering premiums for fully completed, move-in-ready homes, while properties that need a bit of work have been changing hands at hefty discounts or languishing among the listings.

In fact, in some inner-city pockets of our major capitals, I’ve seen older homes where you’re essentially getting the house thrown in for free, because the price being paid is barely more than the value of the land it sits on.

But there’s a change in the air, and for switched-on buyers, that could create prime opportunities to get in and enjoy serious upside.

So, the question I’m asking is, has the renovator market finally turned?

The new reality

Construction costs have been climbing since the pandemic, and for a long while, the pace was alarming.

At first, it was all about materials. Timber, steel, concrete… you name it! While growth in material prices has cooled somewhat, the slack has been more than offset by the rising cost of labour. There simply aren’t enough tradies to go around, and skilled workers quite rightly command a premium.

That same shortage has stretched out construction timelines too. A job that might once have taken a few months can now drag on far longer, and every extra week is another week of holding costs and headaches.

Little wonder, then, that the gap between move-in-ready homes and renovators blew out to such an extreme. Plenty of buyers decided they’d rather pay top dollar for someone else’s finished product than wear the cost, risk and uncertainty of doing it themselves.

Lately, though, I’m seeing signs that the great divide between renovated and unrenovated homes is slowly closing.

In some markets, the capital growth on those shiny, fully renovated homes has begun to ease. At the same time, buyers are showing a renewed willingness to stretch a little further for a place that needs work.

There are a few reasons why. Affordability challenges have been one big driver. A home might be liveable but not pleasant to look at. Big deal! If you can secure a home at a relative discount, live in it while planning for its future upgrade all while avoiding the tight rental market, then happy days.

The other factor is that buyers are accepting the new reality about costs. The sticker shock of building and renovating is wearing off, and buyers are now factoring those numbers into their decisions from the outset rather than being scared off by them.

The market, in other words, is finding its level.

An opportunity gap

The gap between done and not-done hasn’t disappeared, but it is beginning to narrow back to a more normal setting. And that’s exactly the kind of recalibration that rewards those who move early.

When buyer sentiment shifts like this, it tends to gather momentum. Get in before the crowd catches on and you stand to benefit twice over: from the value you add through the renovation itself, and from the broader re-rating of fixer-uppers as demand for them returns.

There’s a tax angle worth understanding, too. When you renovate the home you actually live in (i.e. your PPOR), any increase in value is generally exempt from capital gains tax. Add value to your own home and, in most cases, that gain is yours to keep. This upside has only been amplified by the proposed federal budget changes.

Compare that to flipping an investment property, where the taxman expects his cut, and the family-home renovation starts to look very appealing indeed. Tax is never one-size-fits-all, though, so do confirm your own position with a good accountant.

The time is here

Now, before you rush out and buy the dingiest house on the block, a few words of caution. A renovator can be a goldmine, but it can just as easily become a money pit. Here’s how to stay on the right side of that line.

Do your numbers and do them carefully. Know exactly what the property needs, what those works will cost, and how long they’ll realistically take, then add a buffer, because surprises are about the only guarantee in renovating. To be safe I would build in a 10% contingency factor – you might only get a 5% increase in prices, but prefer to be generous.

Understand the difference between cosmetic and structural. A cosmetic refresh like paint, floors, or bathroom refresh is the lower-risk, better-bang-for-buck end of things. Structural work, like moving walls, extending or raising a home, is far more expensive and carries far more risk. Be crystal clear about which one you’re signing up for. For my reno projects, I like to firstly focus on improving the kitchen/ family area as this is where family members spend the most time interacting and living. This should create more a wow factor when buyers or renters walk into the home. Then secondly, if the budget allows, I focus on bathroom areas, which can be more expensive- but again add more wow factor and create a more favourable impression.

Get your finance sorted, and don’t overborrow. Build in a sensible cushion so a cost blowout doesn’t tip you over the edge.

Think long-term. How will this home work for you and your family over the years ahead? The best renovations aren’t just about resale. They’re about creating a place that adapts to you and your family as your needs evolve over the years.

Know your market and the hidden dangers. What buyers expect in one suburb, they’ll happily shrug at in another, and overcapitalising on works is the classic trap. It’s OK in some circumstances to spend more on upgrades than they add in value, but do it at the wrong time in your ownership cycle, and you can waste thousands of dollars.

Then there are the lurking nasties: rising damp, dodgy wiring, termites, reactive soils. Always, always get a building and pest inspection before you commit to a home needing some love.

Great advice is your best investment

This is exactly where an experienced, independent and well-connected buyer’s agent earns their keep. A good one can sniff out the suburbs and streets with genuine reno potential, assess what a property is really worth both before and after the works, steer you clear of overcapitalising, and negotiate the best possible price and conditions on your behalf.

So, has the renovator market turned? I think the smart money is quietly starting to say yes for the right type of property. If you’re open to securing a fixer-upper but weren’t sure the numbers would stack up, now might just be the moment to take a closer look.

Give us a call on 1300 655 615 to start a conversation about your next property purchase, or click here to send us your enquiry today.

 To have one of our friendly Buyers' Advocate's contact you, click here to:

or

call us on 1300 655 615 today.