Unrenovated properties used to be a goldmine for buyers looking for an opportunity.

But times have changed. The economics of the “fixer-upper” no longer add up for buyers, and experts say properties needing renovations sit much longer on the market than their move-in-ready counterparts.

Chief among the shifts is a compounding affordability crunch that has effectively priced buyers out of taking on a renovation project.

“It used to be that you would put your 20 per cent deposit down and then you might have some money left over for renovations. But since COVID, the cost of renovations and construction has gone up massively, the cost of buying a house has gone up massively, and the cost of living has gone up exponentially,” Your Property Profits director Sophie McLean says.

“Ten years ago, the average loan was $409,000; today it’s $731,000. The average monthly repayment has more than doubled in a decade.”

Translate those macro statistics into a real-world scenario, and the out-of-pocket maths is even more eye-opening.

If a buyer buys an unrenovated $1 million home and needs $200,000 to fix it up, they may need up to $400,000 in liquid cash upfront (a 20% deposit plus $200,000 for works).

However, if the seller spends that $200,000 on renovations first and lists the home for $1.2 million, the buyer needs only a 20 per cent deposit on the higher price tag—just $40,000 more cash upfront to secure a turnkey home.

By renovating beforehand, the seller effectively allows the buyer to finance 80 per cent of the renovation through their mortgage rather than paying for it out of pocket.

“Most buyers don’t have $200,000 in spare cash sitting around after paying their home deposit,” Sophia says.

“So by renovating before listing, you expand your buyer pool dramatically.

“In the end, that renovation may or may not increase the value of the home beyond the cost of the renovation itself, but the value comes in other ways, like less time sitting on the market.”

Completing updates before listing your property can also limit low-ball offers.

Even if you choose not to renovate, securing a firm quote for necessary repairs prevents buyers from weaponising inflated estimates during price negotiations.

“We see it time and time again. People will come in and say, ‘We want the home for $100,000 less, because it needs a new kitchen, and that will cost $100,000, ‘ when it won’t cost anything near that,” she says.

“If you include a quote in your sale documents, you can confidently say ‘A new kitchen will cost $40,000’.”

Beyond financial hurdles, practical and psychological friction points further deter modern buyers from buying the “fixer-upper”.

Renovations are notoriously disruptive and carry hidden expenses, such as funding alternative accommodation during construction. Compounding the stress is a trade sector crippled by insolvencies and labour shortages, making reliable contractors hard to come by.

There can also be a lack of spatial visualisation.

“Research shows something like 5 per cent of buyers can look at a floor plan or a construction drawing and imagine how the house will look built,” Sophie says.

“So for 95 per cent of people who walk in, all they can see is what is currently there. If people can’t imagine what the house could look like, that again narrows your pool of buyers.

But before you rush in with the sledgehammer, note that capital improvements aren’t a guaranteed windfall. Maximising your return on investment requires a strategic, market-tailored approach to distinguish high-yield updates from money pits.

According to experts at Your Property Profits — an award-winning Canberra firm specialising in pre-sale property optimisation — buyer expectations vary wildly, depending on the local demographic and price bracket.

“In O’Malley, for example, where people are spending $4 million on a house, they don’t want to have to come in and double-glaze the windows to achieve comfort and energy efficiency. For that portion of the market, everything needs to be perfect,” she says.

“On the other hand, a 2023 study on the ACT put ceiling insulation at over $600 for an energy efficiency gain of 0.8 stars, and draft sealing at $1000 for 0.7-star gain. Double glazing can cost tens of thousands, and may only give you one star. So in suburbs where the mean house price is at the lower end, you’re not going to get much value back on double glazing.

“If you’re renovating to sell, without overcapitalising, you want a renovator who can handle design, trades and project management, with a proven track record of doing things on time and on budget and focused on that goal.”

For more information, visit Your Property Profits.