More and more home owners are going down the knockdown-and-rebuild path in preference to renovation or moving when they outgrow their current home. Gillian Bullock investigates this real estate trend.
Familiarity with local shops, neighbours and amenities leave many people reluctant to move. After all, selling and buying a property is not a cheap exercise. When you take into account stamp duty, real estate agent fees, legal costs and moving expenses, it can add up to a pretty penny. Renovation may be an option, but for many it's more cost-effective to knock down the original house and rebuild.
Karen Mattingley, marketing manager with A V Jennings, says, "The increased cost of renovation in terms of dollar per square metre makes knockdown more cost effective."
In the past, there were issues with lenders over knockdowns. If you had a mortgage with not much equity then you could not remove the existing building, as the borrowing would exceed the total value of the property.
However, the rise in land prices has changed the picture.
"Ten years ago the rule of thumb was that the block of land and the building had the same value. Now land value far exceeds the structure," says Glynnis Gaskin, NSW sales and marketing manager with Clarendon Homes.
In light of this change, Lisa Montgomery, head of consumer advocacy at non-bank lender Resi Mortgage, says knockdowns are "now much easier than they used to be".
In fact, according to a recent Housing Industry Association survey of the top 100 building companies, the percentage of knockdown-and-rebuild jumped to 15 percent from 10 percent in the previous survey.
HIA senior economist Harley Dale observes, "There seem to be two major reasons. One is land constraint, particularly in the inner city, and the other is that people are taking the opportunity of knocking down modest houses with huge vegetable gardens and building bigger, modern homes which still return value."
Of course, whether you choose to knock down or renovate, it's important that you don't overcapitalise. The old adage that it's better to have the worst house in the best street than the reverse still holds true.
It's probably a good idea to approach a local real estate agent and find out recent prices of the best properties in your area and then ensure you do not spend any more than that either on renovation or knockdown.
And while the thought of starting from scratch may be appealing, remember that if you knock your home down, you are going to have to find somewhere to rent while you have no house in which to live.