Do you want to build your home equity in the new year? Our mates at Macquarie created this guide to help you on the way.
If building equity in your home is on the agenda for the new year, it’s helpful to be across the long-term ways you can decrease your household costs and increase your property’s appeal to the buying market.
Opening doors with more equity
There are two ways to build equity in your home – by increasing the value of your home or by paying off your home loan. That equity can then act as a springboard to new financial goals and choices.
“Increasing the equity in your home gives you options for your future, and it’s personal to you and what you’re trying to achieve,” says Head of Home Lending at Macquarie Bank, Carrie Fox. “No matter what your reason is for increasing your equity, once it starts growing, it helps you create options and opportunities.”
Australians are likely to hold on to our homes for several years. Earlier this year, the median hold period for a property was 9.9 years nationally.1 That means, for many of us, property forms part of a long-term plan – and so does building equity.
If you’re focused on building equity over time, it makes sense to consider both what a future buying market sees as valuable, and how to reduce your household costs. In both cases, sustainability has a big role to play.
New generations, new expectations
Many drivers of value are out of a home owner’s control. Supply and demand, interest rates and the general health of the economy have historically shaped property price cycles. However, you can improve, upgrade and maintain your property to help increase demand for it.
A growing portion of the market is seeing sustainability features in a home as desirable, says Fox.
“While that’s not widespread yet, the future state is encouraging, and we are heading in that direction,” she says.
Australian government agencies are already predicting that sustainable design features are likely to improve the market value of your home2. We think this is likely to play out in the long term for a variety of reasons, including:
New rules: State governments are putting rules in place for new builds that reduce reliance on fossil fuels and encourage energy efficiency. For example, both Victoria3 and the Australian Capital Territory (ACT)4 plan to phase out gas in new builds in the coming months, as part of their big picture goal to help slow climate change.
New incentives: State governments are also incentivising Australians to make changes to their existing homes. For example, the Queensland government is offering rebates for those who replace their existing appliances with four-star rated or higher ones5. Similarly, the NSW government is providing financial incentives for those who install energy efficient equipment and appliances in households and businesses6.
New expectations: There is a growing body of research showing that Millennials and Gen Z value and consider sustainability when making lifestyle and investment choices. Millennials are especially impactful, given they’re set to overtake Baby Boomers as Australia’s largest generation7. For example, one report says Millennials and Gen Z will prioritise sustainability when living in and building their homes8. Another shows protecting the environment is a top concern for those generations and the vast majority (90%) are making an effort to reduce their own impact on the environment.9
Sustainability and savings
Running a household is a major fixed cost of living, with energy being one of the more substantial ongoing costs. But what if your home could help you be your own energy consumer and producer?
Sustainable features in a home, particularly renewable energy sources, put home owners in that unique position. This could help with cost savings over time and when it comes to building equity, those savings can contribute to your home loan.
There are a range of improvements and renovations you can do to create a more environmentally friendly home, from small maintenance fixes to larger builds or renovations. You can read more about your options in this guide, which has practical tips and suggestions for making your home more sustainable.
It’s important to know that improving the sustainability and environmental footprint of your home doesn’t necessarily have to come at a big expense. Some of the better-known ways to make your home more environmentally friendly include switching to solar, which, while cost effective in the long run, does have an upfront ticket price to consider.
Incremental changes can be as small as upgrading your lights to quality LED fittings, or using native vegetation with low water requirements in your landscaping. There are resources here that can help you decrease your ongoing costs, including guidance on affordability assessments.
“At the moment, upfront investments might understandably not be front of mind, given cost of living pressures” says Fox.
“In this case, small ongoing changes over time can still help you move towards having features in your home that are attractive to a future market and reduce your expenses on your biggest asset.”
Do you want to build equity? Let’s talk! Book in a free 15 minute consultation
here and let’s make it happen.