Why Is Home Renovation So Expensive?

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When you’re thinking of renovating a home, it’s easy to go overboard and perhaps waste your money on projects that don’t have a significant return on investment. Aside from the ROI factor, some partial renovations may leave your home in worse shape. This is a particular concern when you buy an older home. Knowing where to draw the line with a fixer-upper can be a battle between your budget and your heartstrings. Whether you have an older home or a relatively new house that you want to change, sometimes you need to reconsider some of your reno ideas.

There are so many great reasons to renovate your home; an improvement in your quality of life increased resale value, or even to update its aesthetic. But the biggest obstacle to renovating, for most people, is cost.

These are the usual expenses associated with remodelling, and we’ll drop some hot tips on how to save a few dollars here and there on your renovation.

Reasons Renovating Costs More Than Building From Scratch

Surprise, surprise!

One of the realities of an extension or renovation project is that there are likely to be a few surprises along the way, and unfortunately, these generally aren’t nice ones. Unlike a new home where there is little scope for surprises to catch you out, a renovation may have any number of surprises that do not reveal themselves until work has commenced. Upgrading electrical work, structural modifications and waterproofing issues are common problems.

There are two common ways that surprises lead to additional cost. Firstly, the builder may add a contingency into their quote to allow for some of these surprises. Secondly, the surprises might be treated as variations to the contract price as they arise, meaning that the additional work and cost may also incur a builder’s margin of up to 20 per cent on top of the other work’s price. In some instances, both of these situations will eventuate. Even after making some allowance in the quote, the actual cost of dealing with unknowns is over and above what has been allowed for and quoted.

Cost of correcting previous mistakes

The older your home is, the more likely it is that it has already had work done to it. Some of that work may be obvious. However, a lot of it is expected to be hidden behind the walls, under the ground and above the ceiling – and there is no way of telling who completed the work or how well it was done until work has commenced. 

Just like the ‘surprises’ that I mentioned previously, the need to correct or upgrade previous work can add a high cost to your project. If you know that your home has had a job done to it, you need to be aware that some rectification costs need to be allowed for. An experienced builder will highlight some of the hotspots for you and advise on the method for rectification and the likely costs involved.

Poor quality documentation

Your documentation set’s quality is critical for renovation and extension projects as it needs to set out the scope of works. Unlike a new home where every part of the project is unique, the drawings for a renovation or extension project will show both the existing house and proposed works. 

The drawings and supporting documentation need to indicate to the builder and trades which parts of the building are new and existing. Those parts that are existing, whether they are being renovated, refitted, refinished, repainted, etc. Poor quality documentation that does not indicate this to builders is more likely to cause inaccurate quotes or inflated quotes. This is because builders are more likely to add more contingency into their quotes, not to be exposed to the risk of cost overruns that often occur when the work scope is not clear.

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Cost of overcoming compromises

One of the big attractions of building an entirely new home is that because you are starting with a clean slate, there are likely to be fewer compromises in the design, though the budget is likely to remain the main limiting factor. The most cost-effective renovations and extensions tend to be those where a compromise level in the layout is accepted to meet budget constraints. That is because the cost of overcoming these compromises often leads to more demolition and reorganising of the existing house’s layout, which, as I mentioned previously, is relatively expensive. 

To keep these extra costs under control, during the design stage, you should be trying to retain as much of the existing layout and structure as possible, keeping in mind that every wall that needs to be removed adds considerable cost and takes away money that could otherwise be spent on new spaces within the extension. An experienced designer should help you find a balance between retaining as much of the house as possible while adding interest and vitality to your new design.

Not thinking about what’s going on outside.

If your project involves an extension, you will also need to consider its impact on the home’s external spaces. We spend a lot of time pouring over floor plans and kitchen layouts, but this is sometimes at the expense of attention we should be giving to the spaces around the home. For example, retaining walls are often overlooked as drawings are developed, which means that the builder will not be aware of any requirement to include them in his quote. Unfortunately, they won’t build themselves, so this will become an additional cost you will need to pay for at some point.

You may also need to factor in refinishing external walls. Rendered surfaces have become popular, and people often take the opportunity of an extension to generate the entire house to modernise it. Again, the cost to render and paint the whole house will be much more than just the new extension, so you will need to communicate your expectations to the builder to ensure that all of the costs are accounted for, and your budget doesn’t blow out.

Electrical oversights

Electrical work is one area that often experiences a blow-out in the budget. Unless they are advised otherwise, builders will usually only make allowance for the bare minimum requirements of electrical items in their quotes, which may only be one light and one powerpoint per room. Often there will be no allowance for light fittings either, just the batten holder with a globe. If you are not aware of this, you are left exposed to the additional costs of more light points and power points (you will get charged per point) and the prices of the actual light fittings.

To rub salt into the wound, any additional expenses over and above what was quoted may also attract a builder’s margin of up to 20% on top of the additional costs. This is another example where using an Inclusions Specification will ensure that the quotes being prepared by builders or trades are thorough and consistent with your expectations. Once again, it’s about being adequately prepared and informed so that you can be realistic about the costs.

How Much Does A Full Home Renovation Cost?

Many factors contribute to your renovation’s overall cost (more on that later). According to Service Seeking, minor renovations can cost as little as $20,000, but you can quickly go over $300,000 for a complete transformation. Most of these costs go to labour, while the next most significant expense is sourcing materials.

Factors That Affect The Price Of Your Home Renovation

The range for renovation costs is enormous, but that’s because no two renovations are ever precisely the same. Here are the considerations that influence your house renovation costs.

Size

Perhaps one of the most significant contributing components is size. Remodelling a studio apartment will be significantly cheaper than renovating a 5-bed, 4-bath townhouse. According to Renovation Junkies, renovation costs per square metre average about $2000-$4000.

Materials

Premium materials come at a premium cost, but you have to factor in maintenance and durability.

A cheaper material at the offset, like weatherboard, could prove more expensive in the long run, especially compared to low-maintenance options like a brick.

Renovation Level

Some renovations involve only minor alterations, such as refurbishing fixtures or changing the fittings. But if you’re planning to completely change your home’s layout (including the locations of electrical outlets or plumbing), expect to pay more as well.

Location

Your postcode can determine just how cheap or expensive your renovation will be. One of the highest costs is labour and hourly wages, which vary from state to state. Canstar states that per-hour rates for renovators could run as low as $50 in the Queensland area and as high as $85 in New South Wales.

Contractor

Even in the same town, two contractors could quote you wildly different rates for the same job. While it can be tempting to accept the lowest offer immediately, consider that paying slightly higher for experience and reputation could be worth it.

Kitchen

Kitchen renovations will be the most challenging undertaking in terms of time spent and labour per square metre. According to Domain, they’ll also be the most expensive, considering all of the appliances and fittings you will need to purchase. This could include replacing floorings, windows or knocking down walls to create an open space layout.

Average cost: $10,000-$45,000

Bathroom

Bathrooms are also labour-intensive. The highest cost usually goes to tiling or new bathroom fixtures. According to the pricing on the tiling store Discount, tiles can run for as little as $15 per square metre or as high as $200 per square metre.

Domain says the costs can range from $10,000-$35,000

Bedrooms

Bedroom renovations can be very cheap or very expensive, depending on how minimalist or grand you want it to be. Having an ensuite will raise the price significantly.

Finder states the average cost for bedroom renovation is: $2,000-$35,000

Living Room

Living rooms are one of the more public/visible spaces in your home, so renovations here will undoubtedly impress.

The average cost of a living room renovation, according to Home Advisor, is: $10,000-$15,000

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Outdoor Area

From a simple grass garden to a patio, deck, and detailed landscaping, your garden renovations can rack up your bill.

Hi Pages state that the average cost of doing up your garden and adding a deck is: $2,000-$10,000

How To Plan Your Renovation Costs And Budget Like A Pro

Most of us think our homes could benefit from a renovation, either modest in scale or monumental. No matter the scope, success lies in intelligent planning. Our three-part renovation guide will arm you with all the information you need to master a successful renovation of any size.

Costs and Budgeting

Unless you’re rolling in cash, don’t spend more than the property’s resale value. Simple. (Theoretically, anyway!) Figure out what you can afford. Here’s how:

Work out your maximum spend. Overcapitalising is an easy mistake. Your investment will depend on a few factors:

  1. The condition of your home.
  2. Even if you’re not planning to sell, the potential resale value of your property gives you an understanding of the local market and prevents overcapitalising.
  3. What you paid for the property. Consider its value. What are comparative homes in your area going for? This will give you an indication of how much you can spend and reclaim when you sell. Different thumb rules are applied to the percentage you should spend on renovating: some say 5 per cent, others 10 per cent, and others up to 20 per cent. But it should be based on what you paid for the property and its current condition – if you paid $300,000, but other houses in your street of a similar size are selling for $600,000, you could spend $200,000 or more (depending on the profit you want to make on resale). But if you paid $590,000 for it, you’d probably be wise not to spend even $30,000.

Renovate to the standard of your future target market. If your lovely home is likely sold to a couple getting their first step onto the property ladder, you don’t need everything to be top of the line – because they won’t be able to afford to cover it in their offer. Instead, a renovation of a moderate level would be more practical. Think kit-set rather than custom-made.

Decide what you want to achieve. Sit down and write a list of all the things you could do in your renovation. Next to them, note whether you think they are Important to Have, Nice to Have or Unnecessary. This will help you prioritise.

Common Mistakes Of Renovating

Now that you know some of the pros and cons of DIY and hiring a professional contractor, as well as some areas where you might pick one or the other, it’s time to make your decision. Whichever route you end up going, the work is just beginning. Make sure to avoid these common mistakes as your home renovation project gets underway.

Not sticking to the budget.

This can happen with DIY or a professional contractor. Before your project begins, set a budget. You may want to add a bit of cushion to your ideal number but work diligently to ensure things don’t go over that budget. 

If you’re opting for DIY renovation, consider all of the costs beforehand. That means tools, materials, paint and anything else you may need.

On the other hand, a professional contractor may, for example, refinish hardwood floors in a few rooms and then try to upsell you, offering to remove the carpet in the living room and bedrooms, too. Be firm and don’t get talked into something you didn’t budget for.

Not knowing who you’re hiring.

Think about any major purchase you’ve made. You didn’t just jump at the first choice that came along, did you? Of course not. You spent time researching your options, looking into the details and weighing the various pros and cons. Do the same with any professional contractors you’re looking to hire.

Check out the websites of your potential contractors, and look for reviews online. Joining sites like Nextdoor can offer excellent word-of-mouth recommendations, and most folks on there are usually willing to provide information for their fellow neighbours. It also doesn’t hurt to contact contractors directly. Get a sense of their work style, hear a quote, and ask any lingering questions. 

Overestimating or underestimating the scope of work

Both of these can be costly in their ways. If you overestimate a DIY project, for instance, you may end up buying things you ultimately don’t need, spending more money than you had to. Meanwhile, if you underestimate the work required for a professional renovation, you’ll probably get a rude awakening when you look at the final invoice. 

Underestimating the scope of work can also happen on a DIY project. You think you have everything you need for a lovely weekend renovation and then realise it’s going to take a few more tools. If the hardware store is already closed, that project is now dipping into the week or the following weekend. And if the room you’re working on is unusable, that’s now introducing an inconvenience into your daily life.

Losing track of your vision

If you’re working with a contractor, you should lay out your expectations for the project. However, if things get delayed or altered, you might end up having a conversation with them about the best path forward. Their vision may differ from yours, so try to stick with what you had in mind as best as you can.

Conversely, a DIY project can quickly turn sideways. Bigger isn’t always better, and what started as a simple fix could end up looking completely different if you allow yourself to get off track.

Home renovations are thrilling and a significant step in any homeowner’s journey. Just make sure you’re doing the research (including the right home insurance for the new additions) and considering the pros and cons before making your decision. That will make the result all the more rewarding.

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