The COVID-19 pandemic has reshaped numerous aspects of our lives, and the real estate landscape in Sydney is no exception. 

A significant shift has occurred over the past 3 years, with homeowners increasingly choosing to renovate or develop their existing properties rather than selling and upgrading. 

This trend has led to a tightening of housing stock, intensifying competition among buyers and property prices driving upward for the most part. There are multifaceted reasons behind this change in homeowner behavior and its profound impact on Sydney’s property market. 

Understanding homeowner sentiment is crucial to understanding how best to purchase property in Sydney.

The Renovation Renaissance

The pandemic has profoundly altered our relationship with our living spaces. Lockdowns and work-from-home mandates highlighted the importance of comfortable, functional, and adaptable homes. 

Consequently, many Sydney homeowners have since shifted their focus inward, investing in renovations to create their ideal living environments rather than navigating the uncertainties of the property market.

Data from the Australian Bureau of Statistics reveals a significant surge in spending on home renovations, reaching $12.4 billion in 2023, a 33% increase from 2020. This figure is almost double the expenditure from a decade prior, indicating a marked shift toward enhancing existing homes. 

Further research by Aussie Home Loans shows that 54% of property owners are opting to renovate instead of sell, with 73% attributing this decision to recent successive interest rate hikes.

Economic Underpinnings

The post-COVID financial landscape has played a pivotal role in this ‘renovate don’t relocate’ trend. 

Rising interest rates have made new mortgages less attractive, prompting homeowners to reconsider selling. For many, it’s more financially prudent to invest in their current properties. Moreover, the costs associated with buying and selling – stamp duty, sales agent fees, and moving expenses – can be substantial. 

Renovating allows homeowners to bypass these expenses while tailoring their homes to their evolving needs and preferences.

The post-COVID property price boom has also significantly increased the equity many homeowners hold in their properties. 

With Sydney property values surging in recent years, homeowners who bought before or during the early pandemic stages have seen substantial capital growth. Many are now leveraging this increased equity to fund renovations instead of selling and moving. 

The ability to redraw on equity means homeowners can upgrade their properties without the additional financial burden of purchasing a new home in a competitive market.

Supply Chain Disruptions and Construction Costs

While the desire to renovate is strong, the construction industry has grappled with pandemic-induced challenges. Supply chain disruptions, material shortages, and labor constraints have driven up renovation costs and extended project timelines. 

Despite these hurdles, the inclination to improve existing homes remains robust, underscoring the value homeowners place on personalising their spaces.

The Domino Effect

Homeowners’ reluctance to sell has created a scarcity of available properties in Sydney’s market. This low stock environment has intensified competition among buyers, leading to higher property prices and faster sales in many regions and asset classes.

According to CoreLogic, national property prices experienced minimal decline over February, with Sydney experiencing  a 0.3% increase in median price. 

The Australian Financial Review reports that a five-year surge in renovations and knock-down-and-rebuild projects has engaged a significant portion of Australia’s home-building workforce, focusing resources on existing properties rather than expanding overall housing stock.

Beyond financial and logistical factors, psychological elements influence homeowners’ decisions. The pandemic has heightened the appeal of stability and familiarity. 

Staying in a known environment, close to established social networks and amenities, offers comfort and a sense of security during uncertain times.

Real-Life Client Reflections (Case Study)

The Inner-West Innovators

In Sydney’s Inner West, a client couple faced the dilemma of outgrowing their two-bedroom terrace. With soaring property prices and limited listings, they chose to renovate, adding a third bedroom and modern amenities. 

This decision not only met their spatial needs but also increased their property’s value, exemplifying the benefits of adapting existing homes. 

There are times the team at Kitty & Miles will encourage our repeat clientele to stay put and leverage the equity they have built – rather than simply going through the pains of selling and buying again.

The Broader Implications

The trend of renovating over relocating has broader implications for Sydney’s property market.

As prices rise due to low stock, first-time buyers face increased barriers to entry, potentially widening socio-economic divides. Affordability is a critical concern for those wishing to enter the market.

Renovations and extensions also contribute to urban densification, influencing infrastructure demands, resource consumption, and community dynamics. In essence, Sydney is building upward and further into our rear yard. Urban density is on the rise at a rapid pace.

On the plus side, the renovation boom supports local trades and suppliers, injecting vitality into the economy and creating jobs during uncertain times. A strong labor force typically translates to strong housing prices.

We also can’t forget that the ability to renovate and stay in established neighborhoods can foster community cohesion and social connections. However, it may also lead to gentrification and displacement in some areas.

Navigating the New Normal

Even though we are a good few years post-COVID, Sydney’s homeowners are still redefining the property paradigm. 

By choosing to renovate rather than relocate, homeowners are influencing market dynamics, leading to reduced housing stock and buoyant prices. 

Understanding this shift is crucial for prospective buyers, policymakers, and industry stakeholders as they navigate the evolving landscape of Sydney’s real estate market.

In this era of change, adaptability and informed decision-making are key. 

Whether you’re a homeowner contemplating renovation or a buyer facing stiff competition, staying abreast of market trends, economic indicators, and government policies will be essential in charting your course in Sydney’s post-pandemic property market.

Buying in Sydney is more complex than ever, but the real estate buyers agent team at Kitty & Miles are here to provide the strategy and execution to secure your dream property for you – lightning fast and for a flat, fixed fee. Call us or email us, we’re here for you – always.