According to estimates, Australians have saved $60 billion a year in cancelled overseas trips as a result of the pandemic, with some of that money going into the property market.
Australians are spending a record amount on renovations each month, thanks to a boom fueled in part by COVID government support, which has seen the number of home improvements reach new highs.
In March, 2050 private residential renovations worth a total of $354 million were allowed in NSW, up from 1850 granted in February for a total of $317 million.
According to a Finder study of Tourism Research Australia numbers, Australians aged 15 and up spent $62.3 billion on overseas travel in the year to June 2019, or an average of $3115 per person.
Although a travel budget of $3115 may appear tiny when compared to property prices, the average figure conceals greater foreign travels, as not everyone vacationed abroad.
“The main difference is folks who were planning a huge, $30,000 trip around Europe and it’s been off the table for a year, two years,” said Sarah Megginson, a Finder home loans expert. “We have to spend every dollar we earn in Australia.”
She stated, “It’s been really questionable as to when that will open up.” “People aren’t willing to wait; they say, ‘OK, the money is here; let’s invest it.’”
Costs Are Up
Home renovations are at an all-time high, with extraordinary demand for timber and other building materials driving up costs by up to 30%, generating shortages and delaying completion.
Timber costs have risen by up to 15%, according to suppliers, and there will be more increases before the end of the year due to “severe limits” on imports due to global competition.
Locked-down first-home buyers had saved money on vacations or other discretionary expenditures to put towards a deposit, while upgraders were also taking advantage of their savings, according to Victoria Peter Kakos, the Agency’s general manager.
“I have never seen anything like it,” says Bernadette Janson, the creator of The School of Renovating, a mentoring programme for women renovators in Sydney. “Now is an excellent opportunity to invest in a high-end property. However, in order to complete your upgrades, you will need to extract all the bunnies from your hat.”
Total prices, which include building materials and tradies, have risen by roughly 30%, according to Janson, and supplies are hard to come by, causing completion deadlines to be pushed back.
Major suppliers are writing to tradespeople to encourage them to be patient since demand is outstripping supply.
Money is cheap right now. Home buyers get a lot of equity when their homes increase in value, so they have this paper equity to borrow from, and they suddenly have this cash because they aren’t spending it on certain activities.”
Savings, according to Finder’s Sarah Megginson, can help first-time buyers improve their serviceability when applying for a mortgage.
“Rather then spending that money on trips or other consumer products, you were able to save it, which shows banks you’re a solid prospect,” she explained.