HOUSING AFFORDABILITY AND YOUR RENOVATION: Why does it cost so much to build / renovate?
Housing Affordability and Your Renovation: Why does it cost to much to build / renovate?
A quick scan of the google search results for “housing affordability” brings up the following headlines:
“Sydney house prices are almost 13 times higher than the median household income.”
“Australia’s 5 biggest cities have “severely unaffordable” housing markets.”
“The average Australian mortgage has cracked half a million dollars for the first time.”
“Australia is the 3rd least affordable housing market…”
Housing affordability is a complex and real issue and we don’t claim to have an thorough understanding or fix on this pressure.
However, there seems to be an elephant in the room when we come across policy discussion – which invariably centres around the supply of housing, “solutions” for the delivery of affordable housing initiatives, and financial incentives such as aid first home buyers.
No one mentions the fact that there has been a generational cultural shift in affluence and expectation, and this is perhaps an immeasurable, intangible and significant contributor to Australia’s current housing affordability crisis.
A 2017 report by Comm Sec on housing affordability provides the following information (quotes in italics)
Australia is building, on average, the 2nd largest homes in the world, trailing behind only the US in size of freestanding homes.
- “Australians are also still building big free-standing houses. The average new house built in 2016/17 was 233.3 square metres, the biggest in four years and more than 11 per cent bigger than 20 years ago. In fact the average house built today is over 30 per cent bigger than 30 years ago (the 1986/87 financial year).”
What is now expected was once luxury.
- “Not only are houses far bigger than those built in the 1980s and before, but the standard of fit-out today is far superior with quality kitchens, bathrooms, floor coverings and inclusions like air-conditioners.”
Our impression is that most people of my vintage (say over 40) are living in homes far larger than they grew up in.
- “In fact houses are around 11 per cent bigger than 20 years ago and over 30 per cent bigger than 30 years ago.”
Why is this an issue to include on our MWa blog?
The MWa advice for clients dedicates lot of our resources to the issue of project and construction costs.
All of our clients are focused on their finances and capacity to undertake a new build or renovation.
The choices our clients are making in regards to their brief and what is being built, it the result of cultural expectations.
And we constantly wonder ourselves, why does it cost to much to build / renovate?
Our observations are that residential building costs and therefore, housing affordability, are on the increase, not just due to inflation, labour costs and materials costs. Other contributing factors are:
- drastic changes in how we think about our homes since the 1940s (see points above)
- population growth (ie in Sydney), rising property prices and demographics
- the planning approvals and building regulation framework
1 changes in how we think about our homes since the 1940s, due to affluence and expectations
A typical post world war 2 home in Sydney was built in a time of both rapid suburban growth and during a time of austerity, where materials were in short supply.
A typical suburban home (ie Manly Vale Bush Home in Sydney’s northern beaches) was a three bed, one bathroom, 120sqm fibre shack with a brick foundations, timber structure clad in fibre with a tiled roof. No garage, just a carport. No swimming pool, just a large front and back yard on a 700sqm block of land. No large outdoor living area, just a front porch. Small bedrooms, no built in robes or storage, one bayonet light fitting per bedroom, no powerpoints in the bathroom, no heating, no insulation. One small kitchen, one living room.
Every older home MWa have renovated in the past 11 years, we have made the home bigger in nearly all ways, both in terms of size of the home (total area), numbers of room, types of room and functions within the home.
From the original 120sqm to the current 170sqm, the Manly Vale Bush Home is perfectly adequate for a family of six (no garage) and yet many homes we are renovating/builder are commonly 280sqm to 330sqm, including garaging.
The number of rooms is increasing including the number of:
bedrooms (ie: main bedroom, a bedroom for each child, a guest room or an au pair room, plus another room as a dedicated study for work from home) (note here: all main bedrooms have walk in robe space with an ensuite, all bedrooms have built in robes and sometimes desks, all bedrooms are large in comparison to the 1940s room sizes (sometimes not quite 3x3m)
bathrooms (ie: powder room, ensuite, family bathroom, sometimes guest bathroom or a bathroom for outdoor use with the pool) (sometimes we talk clients out of adding that 5th or 6th bathroom)
living rooms (ie: 2 living rooms, one new open planned living room plus a 2nd cosy TV room or a games room, one for the kids and one for the adults, and then an outdoor living room also with lounging and outdoor dining)
size and number of kitchens (the size of kitchens in expanding and now often includes the front of house kitchen on display in the open planned living space plus the back of house – walk in pantry or butlers pantry, necessitating a doubling up of appliances – sometimes 2 sinks, 2 dishwashers, 2 ovens, 2 fridges, space for additional appliances such as microwaves/steam ovens/plate warmers/coffee machines/zip taps, space for wine and drinks storage with wine/bar fridges)
in addition to the indoor kitchen, there’s the outdoor kitchen – and these are also becoming so popular and so well equiped that they are full kitchens with sink, fridge, bbq, range hood, bar/drinks etc.
size of laundries & their storage is also increasing, with washers, dryers, ironing, storage space for the management of large families and the abundance of clothes we all have
facilities for housing the increasing number of cars – double garages, carports, plus the growing requirement for the amenity of internal access or at least covered access from the home to the car, when the garage is actually being used for cars and not for the storage of all the other household “stuff” – ie bikes, sporting equipment, luggage, gardening & pool equipment and overflow from the house
outdoor living spaces, large enough for the bbq and outdoor kitchen, outdoor dining space, sometimes big enough for outdoor lounging
pools and pools with spas, including pool cover and heating
guest accommodation & bathroom, refer to number of bedrooms and bathrooms
secondary dwellings, as under the NSW planning legislation for Housing Affordability (aka the granny flat code), secondary dwellings of up to 60sqm can be built to co-exist with an existing residence on a single land title.
In addition to size, what is now expected was once luxury, in terms of the inclusion in our residences.
Consider this list of common inclusions in contemporary renovations and note that very few of these were available or commonly included in new typical suburban homes built in the 1940s, 50s and 60s:
- in floor heating
- heated towel rails
- frameless glass
- double basins
- larger bathrooms to fit the resort like bathrooms and freestanding baths
- walk in robes larger than most bedrooms
- built in joinery
- number of powerpoints
- usb charging points included in power pointspoints
- ceiling fans
- air conditioning
- water tanks
- solar panels for hot water or generating electricity
- pools, spas, heaters, pumps
- double fridges or two fridges
- wine storage and wine/bar fridges
- internal access from garage (if you can past the stuff)
- multiple TVs
- home offices – computers essential, charging point
- separate homework spaces for kids
- newer and newer home automation gadgets
- feature fireplaces
2 population growth (ie in Sydney), rising property prices and demographics
Interestingly, as the potential for and the increasing popularity of secondary dwellings is due to housing affordability (or lack of affordability), it is also causing our suburban homes to become larger.
As housing affordability stress is caused by population growth, rising land and house prices and demographics change, a large home or a secondary dwelling in Sydney enables families to share their residence with more people ie: multi generational guests/grandparents, au pair live in help, teenagers to young adults who stay at home longer, co-living with young couples/young families, who can’t afford their own apartment or home.
Our large homes are now working harder for us, being more fully utilised. Australia’s residential density, in terms of number of people per dwelling, has started to increase, after decades on decreasing.
3 the planning approvals and building regulation framework
The residential building industry is affected by increasing complexity of statutory planning approvals requirements and building regulation framework, which significantly impacts on construction costs and housing affordability.
These regulations were just not in place for past generations of home owners, a case of inter-generational inequity.
One hopes this increasing regulation is improving the minimum standards of our housing stock, however it is certainly increasing the costs.
Local council requirements for standard residential DA submissions can be in the ballpark of $25K.
Local council requirements to provide on-site stormwater infrastructure can be in the order of $5 to $30K.
BASIX requirements for energy and water conservation are worthy, should improve the comfort and reduce the ongoing operational costs of homes, as well as reducing the use of natural resources, however, they come at an increased building cost.
The cost of compliance with DA conditions of consent and building regulation compliance – imposed by Councils, National Construction Code, Building Regulations, Australian Standards, the insurance industry, and other factors such as awareness over bush fire prone land etc, is extraordinary in comparison to how things used to be.
These higher standards should be delivering greater public benefit and raising the average standard of Australian housing. They are in some cases, but I’m skeptical about many. But the cost of compliance is certainly rising and is a contributor to our housing affordability.
So when considering your home renovation or new build, and you wonder why it cost so much to build / renovate in 2018, consider the possibility that doesn’t have to cost quite so much.
Consider keeping things simple and more modest.
A large home does not necessarily make you a happier person or a happier family.
A beautiful, considered and comfortable home can.
A less stressful financial position probably will.
Make some hard decisions at the beginning of your project, and then enjoy the process and the benefits that flow.