How could inflation and continued interest rate rises impact your home renovation plans?
The past few years have seen Australians experiencing increasing interest rates, rising costs of living and growing uncertainty in the housing market – particularly when it comes to new builds and renovations.
If you’re planning alterations or additions to an existing property, you might have lots of questions about the impact inflation and interest rate rises might have on construction costs which will impact your renovation plans.
What's the current situation?
There’s a lot of conjecture and discussion around the impact of these interest rate increases and their effects on the housing and construction markets.
The overall goal of these continued interest rate increases is to slow the rate of inflation. But typically, when we see an increase in interest rates, we see an increase in the costs of borrowing, resulting in a slowdown of production in the construction industry.
This decrease in productivity impacts both new builds and renovations. So if you’ve set your hopes on some home alterations, how might inflation impact those plans?
The impact of interest rate rises on a home renovation
An increase in demand for new homes and builds during the pandemic (with the release of the Federal Government’s stimulus program HomeBuilder), as well as low interest rates, saw construction booming. But, like everything, what goes up must come down, and the construction industry has started to slow.
Along with the rise and fall of demand in construction, inflation has increased the cost of goods and services, which also increases the costs of materials and labour required for renovations.
Now, rising interest rates have been making it more challenging for people to obtain finance for renovations. This continues to lower the demand for home alterations – people simply aren’t sure if they can afford to renovate.
With difficulties in achieving finance, a decrease in demand and an increase in supply costs, it can certainly be tricky to successfully manage the costs and plan for a renovation.
Overcoming these challenges
If you’re looking to renovate or have any alterations or additions but are worried about how the current interest rate climate might impact your plans, there are several things we often suggest.
- Prioritising your renovations
In the early stages of your renovation, we’ll have planning sessions where we’ll discuss your objectives, your ideas and your overall lifestyle and future plans. Are you looking to renovate now to sell in the near future? Or are you looking for practical additions like separate living quarters for a family member?
Understanding your plans and goals will allow us to help you prioritise your renovations and make conscious choices that will add value to your investment, not cause a drain on your finances.
- Addressing any maintenance and repairs
If your home requires a lot of maintenance or repair work, neglecting to address that can cause further deterioration down the track that can cost even more to fix.
- Core improvements
Depending on your budget, you may be able to streamline a renovation and subsequent costs by focusing only on core improvements. These include anything that impacts the safety, functionality and structural integrity of your home, or anything else that you would consider a core element of your home.
- The Master Plan approach
One way we can ensure all the above considerations are addressed is to develop a Master Plan for our clients. A Master Plan will look at not only the renovation plans and what’s possible but also other areas of the home that need addressing, such as general repairs and refurbishment i.e. replacing the roof, repainting parts of the home etc. Many people don’t realise the cost of these items and how they can impact the budget.
In the current market, we find it useful to prepare the Master Plan for the design of the alterations and additions work together with a list/schedule of areas or items needing upgrading. This package can then be given to a builder and/or cost consultant for preliminary pricing. From there, areas of the home can be prioritised to suit the owner’s immediate needs/requirements whilst staying within budget.
The other advantage of the Master Plan approach is that the work can be undertaken in an orderly manner and more importantly, avoids rework or re-planning of earlier work that may have already been renovated.
Architectural support might not be as costly as you think
Inflation and rising interest rates might have put a dampener on your renovation plans, but that doesn’t mean you can’t move ahead with them.
When you’re working with strategic design experts like Playoust Churcher, you minimise the risk of encountering surprise costs or hidden fees.
We help our clients determine whether their budget is suitable for their plan and advise the most effective ways to successfully create an affordable home renovation design.
Contact us today to discuss your plans!