According to the latest property market update by valuers Herron Todd White, the Central Coast market continues to experience unprecedented growth but may be reaching its peak and dual occupancy may generate a better return than renovations.
“Many property owners are deciding what to do next,” the August edition of the Herron Todd White property review said.
“Some recurring questions raised recently include: should we sell; can we buy back in; should we rent after selling; would it be a good idea to renovate our existing property?
“These are the typical questions we receive when the market is on an upward trajectory.
“Commonly, the answers remain inconclusive with balanced arguments for and against.”
According to the valuers, seasoned renovators on the Coast know that qualified tradesmen are in short supply.
“Calls generally made to numbers on fridge magnets or contacts on Hi Pages ring out unanswered for many.
“Whether it be for a small internal renovation, proposed additions or a completely new build, it can be quite a stressful time for property owners new to renovating or building for the very first time.
“Since the emergence of COVID, the government reacted to the economic challenges and introduced the Home Builder grant scheme, allowing property owners to apply for a government grant to assist in building a new home or completing a substantial renovation.
“Although the scheme has now expired, construction projects that benefited from the grant are currently in progress across the region.
“Discussions with local builders on the Central Coast confirm that the waiting time for building materials such as timber used for framework has been on the rise, steadily increasing throughout 2021 due to supply issues globally.
“Property owners who have received building quotes for proposed renovations or new builds and delayed signing their contracts have experienced cost increases.
“These increases generally are absorbed by the owners with no added value realised due to cost escalations.
“This makes the risk of overcapitalising even greater if the appropriate market research has not been undertaken prior to the commencement of building works.
“Geographically, the southern end of the Central Coast has a very limited supply of vacant land.
“Suburbs such as Umina Beach, Woy Woy and Ettalong Beach are steadily being transformed with original 1950s to 1960s cottages being extended and renovated or knocked down for new dwellings to take their place.
“In some cases, depending on the zoning, properties are being further developed into small villa or townhouse developments.
“The sale of a circa 1978 villa at 1/4 Ocean Beach Road, Woy Woy is an example of a successful property flip.
“Purchased in January 2021 for $380,000, an internal renovation was completed before being resold in May 2021 for $575,000, a 51.32 per cent ($195,000) increase in value.
“Although an outstanding result was achieved by the vendor, it is worth mentioning that there is always a level of risk when undertaking similar projects with market conditions heavily influencing the end sale price.
“Opportunities like this could be short lived as we move closer to the peak of the market.
“Although strong market conditions are still being experienced, there is evidence emerging in the marketplace that recently renovated properties are being listed for longer with vendor expectations exceeding current market values and real estate agents recording price adjustments to marketing campaigns before an offer is accepted.
“This can be viewed that we are possibly nearing the top of the property market cycle.
“If this is the case then property owners who are thinking of renovating and selling in the near future should be cautious and undertake the necessary research prior to commencement of works.
“Although we are seeing many renovation projects across the region, dual occupancy development appears to be the development of choice for local investors.
“Where cricket was played by kids in the backyards of their parents’ home is now the prime location for secondary dwellings.
“Detached dual occupancy properties can now be found in many areas across the region with reliable yields wherever you look.
“Price points do differ, with dual occupancy properties in the southern end of the region such as Umina Beach and Ettalong Beach selling for $800,000 and above.
Media release, Sep 14
Herron Todd White Valuers