Renovate or move? Why the maths now favours staying put
Upgrading from a $1.1M home to a $1.5M one costs about $122,000 in transaction fees before you have changed a thing. With rates at 4.35% and battery rebates stepping down, the calculation has shifted.
There is a number almost nobody puts in the spreadsheet when they start browsing listings, and it is the number that should decide the whole thing.
Sell a $1.1 million house in Melbourne and buy a $1.5 million one, and the move itself costs you roughly $122,000. Not the price difference. Not the bigger loan. The cost of the transaction, paid to the government, the agent, the conveyancer and the removalist, and gone.
Here is where it goes.
| Selling the $1.1M home | |
|---|---|
| Agent commission, around 2% | $22,000 |
| Marketing campaign | $7,000 |
| Conveyancing | $1,500 |
| Styling and presentation | $3,000 |
| Buying the $1.5M home | |
| Victorian stamp duty | $82,500 |
| Conveyancing | $1,500 |
| Building and pest | $800 |
| Loan establishment | $1,000 |
| Removalists | $3,000 |
| Total | About $122,000 |
Stamp duty is the brutal one. In Victoria, anything above $960,000 attracts 5.5% on the entire value, so a $1.5 million purchase hands the state $82,500 in a single line. You do not get it back. It does not sit in the house. It is not equity.
Nationally the picture is the same. On a $1.2 million property, total relocation costs typically land somewhere between $80,000 and $150,000 once every line is counted, and that assumes the new place needs nothing done to it.
Why this matters more in 2026 than it did in 2021
Three things have moved at once.
Rates. The cash rate sits at 4.35% after three increases this year, and the Reserve Bank held in June rather than cutting. The big four are split on what comes next: three of them expect holds through the rest of 2026 with cuts sometime in 2027, while Westpac is alone in forecasting two more hikes. Either way, the era of upgrading into a bigger loan at 2% is finished.
Borrowing capacity. A higher rate does not just raise your repayment, it shrinks what the bank will lend you in the first place. The house you could have bought two years ago at the same income is not the house you can buy now.
The rules are changing underneath property investors. From 1 July 2027, negative gearing on established homes is curtailed and the flat 50% capital gains discount is replaced by an inflation-indexed system with a minimum 30% tax on gains. New builds are exempt and existing holdings are grandfathered. That is not directly a homeowner problem, but it changes who is bidding against you, and for what.
Put those together and the upgrade that felt inevitable in 2021 now costs more to execute, buys less house, and lands you with a larger repayment at a higher rate.
The comparison people should be making
The question is not really "renovate or move". It is: what does $122,000 do in each case?
Spend it moving and it is consumed. Every dollar of stamp duty and commission leaves your balance sheet permanently.
Spend it on the house you already own and some portion of it stays. Not all of it, and this is where people get carried away, but some.
That is the whole argument, and it is a strong one. But it comes with a caveat that the renovation industry tends to skip past.
Renovation does not automatically add value
Overcapitalising is real and it is common. It means spending more on a renovation than the local market will pay back at resale, and the cure is boring: look at what houses in your immediate street and pocket have actually sold for, and keep the total spend inside what that ceiling allows.
There are also things a renovation simply cannot fix.
- Land size
- Which school zone you are in
- The main road at the end of the street
- How far you are from work
- A floorplan that is fundamentally wrong rather than merely dated
If your reason for moving is on that list, no amount of new flooring will help, and the $122,000 might genuinely be worth paying. Be honest with yourself about which problem you are actually solving.
A better way to sort improvements
Most renovation advice sorts by room. That is the wrong axis. Sort by what the money actually does, and three groups fall out.
1. Improvements that reduce what the house costs to run
Solar, batteries, insulation, draught sealing, heat pump hot water, reverse-cycle heating replacing gas. These pay you back in cash every month regardless of what happens to the property market, and they are the only category where the return is measurable rather than estimated.
2. Improvements that a buyer will pay for
Kitchens, bathrooms, flooring, a decent laundry, fixing anything a building inspection would flag. These generally return some of their cost at sale, subject to the overcapitalising ceiling above.
3. Improvements that do neither, and that is fine
Pools, elaborate landscaping, outdoor kitchens, home theatres. A pool rarely returns what it cost, adds ongoing maintenance and insurance, and narrows your buyer pool to households who want one. That is not an argument against putting one in. It is an argument against telling yourself it is an investment. Spend the money because you will use it, not because a spreadsheet said so.
The mistake is treating all three as the same decision. They are not remotely the same.
The energy money currently sitting on the table
Category one deserves its own section, because there is a large amount of public money available right now and it is scheduled to shrink.
The federal Cheaper Home Batteries Program cuts roughly 30% off the cost of an installed home battery, worth around $252 per usable kilowatt hour. In practice a 10kWh battery costing about $11,120 attracts a rebate near $3,110, bringing it to roughly $8,010 out of pocket. The discount comes off the invoice at installation, so you are not claiming anything back later.
Two details matter.
It steps down. From May 2026 the rebate value decreases every six months rather than annually, falling from 6.8 certificates per kilowatt hour now to 2.1 by 2030 when the program ends. Waiting has a price, and that price is now known in advance.
The full rate stops at 14kWh. Batteries with usable capacity at or under 14kWh get the full rebate on every kilowatt hour, which covers most households comfortably.
What it returns depends on how you use it. A typical 10kWh battery reduces electricity bills by somewhere between $730 and $1,680 a year, driven mostly by whether you can shift consumption into the hours the battery is charged.
State support varies sharply and it is worth checking before assuming. New South Wales has an interest-free loan up to $15,000 plus a further incentive of up to $1,500 for connecting to a virtual power plant. The ACT has a low-interest loan up to $20,000 from 1 July 2026. Western Australia has an interest-free loan up to $10,000. Victoria, South Australia, Queensland, Tasmania and the Northern Territory have federal support only, their state schemes having closed.
On gas: replacing gas heating and hot water with efficient electric units usually reduces running costs, particularly alongside solar, and disconnecting gas entirely removes the daily supply charge you pay whether you use any or not. But the disconnection itself often carries a fee, and going electric without solar or a favourable tariff produces a much smaller saving than the marketing suggests. Get a quote with your actual usage in it before committing.
How to make this decision properly
Four steps, in order.
- Price the move honestly. Stamp duty at your actual purchase price, agent commission at the real rate for your suburb, marketing, conveyancing both ends, removalists. Do this before you look at a single listing, because the number changes how the listings look.
- Find your ceiling. Check what the best houses in your immediate pocket have sold for. That is the cap on sensible renovation spend, and it is a suburb-level number, not a national rule.
- Separate the three categories. Work out how much of what you want is running-cost reduction, how much is resale value, and how much is lifestyle. Fund them from different mental buckets and stop pretending the pool is an investment.
- Model both paths on your actual numbers. What the repayment looks like on the bigger loan at 4.35%, against what it looks like if you borrow against existing equity to renovate. Include the transaction costs in the first one. Most people do not, which is exactly why the move looks cheaper than it is.
Where this lands
Not everyone should stay. If your problem is land, location or a school zone, renovating is expensive avoidance and you should move.
But if your problem is that the kitchen is tired, the heating costs too much and you want another bathroom, then handing over $82,500 in stamp duty to solve it is a very expensive way to get a new kitchen.
The transaction costs have not changed much. What has changed is the rate environment on the other side of the move, and the fact that the government is currently paying for a meaningful chunk of the improvements that lower your bills permanently.
Run both. The number will usually tell you which one it is, and it is often not the one you assumed when you started scrolling listings on a Saturday morning.
Figures checked August 2026. Stamp duty, rebate rates and lending conditions change, sometimes at short notice. Funance provides general information and planning tools only, and does not take into account your objectives, financial situation or needs. Speak to a licensed financial adviser, a mortgage broker or a registered tax agent before making a decision this size.