The latest edition of the HIA Renovations Roundup was recently released.
This report marks Australia’s most comprehensive pulse-
taking exercise of the nation’s $30 billion-plus home
renovations market. As well as assessing the current state
of the market, the Renovations Roundup also provides
forecasts of renovations activity for each of the states and
territories out to the year 2020.
Many people are surprised to learn that the performance
of the home renovations market is not always in step
with that of new home building activity. Indeed,
events over the past decade have illustrated this
divergence quite starkly. For example, while the
new home building side of residential construction
enjoyed its largest and longest ever upturn between 2012
and 2016, renovations activity endured a sharp
contraction between 2011 and 2013, with the
volume of activity falling by some 14.4 per cent over
the course of two years. The ensuing recovery was
slow to gather momentum – a snail would have
made faster progress to begin with. However, by the
end of 2016, renovations activity was 8.5 per cent up
on its 2013 trough.One of the key features of the HIA
Renovations Roundup is that results of a unique
quarterly industry survey are presented and analysed.
In terms of its reach, the renovations market is a
generous one: the key participants are overwhelmingly
concentrated amongst sole traders or small firms, with
the glow extending to a further cohort of subcontractors
such as electricians, plumbers, painters, carpenters
and plasterers.In terms of the specific types of
renovations work done, repairs and maintenance jobs
are the bread and butter of the market in the post
GFC world. Other importantsources of work identified
by the survey include kitchens and bathrooms. These
areas of the house have traditionally been very popular
to renovate, and in the case of a kitchen, a larger
square metre footprint often emerges from the reno
job. The HIA-GWA Kitchens & Bathrooms Report
2016/17 was released in early April and provides
comprehensive coverage of activity both in terms of new
homes andkitchen and bathroom renovations work.
One segment of renovations that has been hard
hit in the more cautious post-GFC world is structural
extensions. The Renovations Roundup survey does
provide evidence that this important component of
renovations activity is again gathering steam, a
finding supported by anecdotal evidence. This is a
really encouraging development.
With conditions in the renovations market
considerably quieter than in new home building,
over one third of renovators have indicated that
they have taken on new home building work
this cycle. Over recent years, a perception has
grown that Knock-down Rebuild (KDR) work
has been replacing some of the larger renovations
jobs. The latest survey results largely refute this
theory – just 28 per cent of respondents are of
this opinion. In all likelihood, we are seeing a
recovery in both KDR and structural extensions,
with the recovery in the former segment of the
market beginning first.The recovery in renovations
activity that has played out over the past few years
was prompted by the reduction to historic
lows of interest rates across the spectrum. This allowed
households to undertake borrowing for home value
enhancing renovations work at lower cost. The fact
that this environment was preceded by several
years of heavy saving by the household sector
meant that a large reserve of cash was also
available for the purposes of renovations work.
Added to the mix was the strong upturn in dwelling
prices since 2012 in Sydney and Melbourne. This
more than replenished the home equity tanks,
especially in Sydney, which had been running
on empty for nearly a decade. This overall
situation has provided would-be renovators in
Australia’s two largest cities with the confidence
and – more importantly – the money to give the
green light to renovations work on their homes.
Over the medium to long term, the single most
important driver of home renovations work is
the profile of the dwelling stock. HIA research
demonstrates that renovations activity is
disproportionately concentrated in detached
houses aged between about 20 and 40 years.
On this front, the indications are reasonably
promising: although the number of houses
in the 20-to-30-year age bracket will fall back
a bit over the next 10 years, there will be a
much greater rise (roughly 14 per cent) in
houses in the 30-to-40 year cohort
(think about all those houses built between
about 1985 and 1995). Assuming economic
conditions are reasonably accommodating
over this period, the scope for increased
renovations work is quite substantial over
the next decade.
Another plus for market prospects is the fact
that the 2011-13 downturns have produced
an accumulation of overdue renovations jobs.
No doubt, some of these are already being
tackled, but it is likely that a continued stream
of activity will originate from this source in the near future.
Perhaps the biggest obstacle to renovations
demand over the short term is the continued
drop in turnover in the established house
market. Latest data points indicate that
established house sales fell by 3.9 per cent
over the year to the June 2016 quarter. This
matters because one of the biggest triggers for
renovations activity is the sale of a house.
In many cases, the new owners of older
houses will initiate renovations work after
taking possession. The fact that fewer old
houses are being sold is a challenge from the
point of view of renovations activity.
In 2016, renovations work across Australia
rose by 2.7 per cent to a value of $33.06 billion.
This actually represented a modest deceleration
from the growth rate recorded in 2015.
This year, growth is projected to slow again
(up 0.3 per cent). However, the pace of growth
on the renovations side of the residential
construction market is anticipated to speed up
to 3.2 per cent in 2018. Further expansions of
2.4 per cent in 2019 and 2.5 per cent in 2020 are
likely to restore the market to its peak prior
to the 2011-2013 downturns. Over the entire
forecast period, the HIA Renovations Roundup
outlines how the total value of work is projected
to increase from $33.2 billion in 2017 to
nearly $36 billion in 2020.