HOME > BLOG > Renovating and Building > Should you go bigger or move?

If you’re fed up living like a sardine then maybe you need a bigger house. But whether you’re looking to extend or move just make sure you consider both sides carefully

Whenever you have a dinner party are your guests awkwardly rubbing knees with each other as they squeeze around your small dining table? Is your lounge room so cluttered you get lost in it? Or is one of your kids threatening to sleep in the laundry because they can’t bear to share a bedroom with a sibling?

If any of these scenarios drive you mad then you’ve officially outgrown your house. However what’s better and cheaper – to renovate your house to make it bigger or to just move to a larger one?

Extending

  • Will you cope with the pressure?

    The obvious advantage of extending is that you can design your dream living space – whether it’s an extra bedroom, or open plan area. Whilst there might be restrictions given land size, architects and builders are quite innovative when it comes to creating extra space. What’s more, from a financial point of view, even a basic extension or extra bedroom can increase the future value of a home – although it depends on the location.

    Careful planning is needed to make sure you create a balanced home. Bad extensions can be a nightmare to rectify. A four-bedroom home with a large open plan living space but miniscule bedrooms might not appeal to a lot of buyers if you need to sell.

The Sums

At a conservative estimate a basic renovation will cost approximately between $1,500 - $2,000 per square metre. So an extra ground level bedroom of 4m x 4m (16sqm) would cost at the least around $24,000. If you are looking to create a second storey bedroom the costs would roughly double. However people rarely just add on one extra room. Often many spaces in a home are reconfigured. For example a new kitchen can range anywhere from about $10,000 to well over $50,000.

On top of construction you need to factor in extra costs for architects, draftsmen, structural engineers, building regulations checks and planning permission. All up you could be looking at between $150,000 to $300,000 to put on a basic extension reconfiguring several rooms and probably need extra for contingency.

“Renovating can be difficult,” acknowledges State Custodians senior manager Anouska Linz. “A lot of people think I’ll become the owner/builder and just get contractors in. However lenders won’t approve that. It has to be with a registered builder. It’s also a disruptive process that’ll take many months to complete.

“Also if you run out of money during the renovation the property just sits there. Things like carpets and furnishings do often blow the budget out. The owners just have to wear it - the lender can’t do much about it in that circumstance, especially if there is little equity in the property. If the house is already under a construction loan it can be particularly difficult to find additional finance. Then if property is not finished, the lender may decide to take action on a property if they are concerned.”

Moving

  • Will your mortgage blow out?

    Sometimes extending isn’t an option. You have to weigh up whether your family can take the pressure and disruption. However, moving comes with its own hassles. “Buying another house can be hugely costly,” says Anouska. “There’s also a lot of work involved such as researching areas, moving costs, the disruption to your household, finding new schools, disrupting the kids etc.

    “It can be a tough time. Many people can’t afford to have two loans going at the same time so they need to sell one house before buying another one. Then they have that gap in between wondering where they’ll live.”

The Sums

Given the price of an average home is now $1million plus in some capital cities, moving to a new house can be pretty expensive. If you sell for $1million an agent’s fee of 2 per cent on such a property comes to $20,000. House staging costs can be around $3,000, advertising is about $3,000, solicitor roughly $2,000 and moving about $2,000. Plus if you need to fix up a few things before selling that will add thousands more.

To buy a new home in many cases you have to pay stamp duty which is a whopping $40,000 on a $1million property in NSW. Plus the fact that most people selling a $1million home to upsize will be most likely looking at properties in the $1.2million plus bracket, or significantly more than what they sell for so there’s a shortfall.

And even if there’s nothing to structurally change in your new home, relatively few properties are turn-key ideal. Cosmetic touch ups often needed to make a place liveable, can whack on an extra $10,000 to $50,000 or more depending on what has to be done.

“By the time you factor in all these costs you may not have as much money as you’d like which would impact what you can buy and where,” says Anouska.

The Bottom Line

  • Unless you have sizeable cash saved up front, whether you extend or move could come down to one thing: your lender. The fact is you need a substantial amount of equity in your property to get a loan to do either and you need professional advice. If it’s no-go the only other option is to make peace with your small surrounds and continuing living where you are without extending. Lots of people do this. Could you?