The landmark French Art Deco home in Newtown sold at auction.
A landmark Newtown home that’s sold for $1.45m less than sellers paid for it just four years ago offers an extreme example of the impact that fear of rising building costs has on the upper end of the housing market.
The five-bedroom French Art Deco home, Manon, sold for $3.3m after it went to auction last weekend.
The vendors had paid $4.75m for the 1905 landmark Noble St home in 2022, amid hot competition when Geelong prices were booming at the height of the Covid pandemic.
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The dramatic decline in price comes as building costs soared in the wake of the pandemic, and continue to rise today, fuelling fears that renovation budgets still have a tendency to veer out of control.
Buxton Newtown selling agent Tom Butters said: “It’s probably a good example that in the opinion of the market, the home needs a lot of work and this is probably the best example of how building costs have affected that end of the market.”
“The fear is the cost for people what once would have been a $1m renovation is more like a $2.5m renovation,” he added.
The kitchens is one of the rooms that have been updated.
The five-bedroom house offers grand features such as high ceilings, leadlight windows and ornate fireplaces.
Mr Butters said the sellers had grand plans to transform it into a beautiful family home, but circumstances changed.
“Just in that time the building cost change has affected that market so dramatically that we listed it with expectations about similar prices than they bought it and 14 months later, we’ve had to sell for $3.3m.”
New data reveals the cost of building a new home in Australia is 47 per cent more expensive than pre-pandemic pricing.
Recent Australian Bureau of Statistics data reveals building and construction costs continues to rise, up 2.5 per cent over 12 months, with bigger increases in electrical equipment, copper wiring and copper pipe.
Building costs have soared since the pandemic, and continue to rise according to the latest official data.
But Mr Butters said the buyers for the home have a good track record of renovating homes.
“They’ve got great vision, and they could see how beautiful it is,” he said.
“In my opinion, that’s a home that you could spend $100,000 on with colours and paints and new light fittings and make it very special of the era, or you could go that extra level and do a big renovation, and have a landmark,” he added.
New PropTrack data reveals 93.9 per cent of homes traded in Geelong in the past year, sold at a profit. The median profit was $261,000.
PropTrack senior economist Angus Moore said home price growth had been softer over the past few years, leading to an increase in properties selling at a loss in the region.
“It has been modest, but they were there. That sort of environment means there’ll be some sellers for whom the prices were down over their hold period,” he said.
Average hold times between sales had also fallen in the region, contributing to a higher rate of loss-making sales, Mr Moore said.
Softer price growth has hit the profitability of sales on homes held for a short time.
Geelong buyers and vendors advocate Tony Slack said building costs for renovations or rebuilds, or to bring a house up to a minimum standard for the rental market were key factors holding price growth.
“Nearly the number one determination on your risk to make a profit versus making a loss is the demand for that property,” Mr Slack said.
“If you’ve got low demand for that property, then combine that with a plentiful supply that’s certainly going to have the major bearing on it, compared to a property that may need renovation, but it’s the only one available within the five kilometre radius,” he added.
Mr Slack said owning a property for seven to 10 years is the ideal duration to lock in a profit when reselling.
“It’s not about timing the market, it’s time in the market,” he said.
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