Higher Density Housing to Alter Renovation Types: Economist

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Tuesday, July 1st, 2014
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The trend toward higher density housing in Australia will have significant implications for the type of renovation jobs which will be in demand over the longer term, a respected economist within the construction sector says.

Housing Industry Association (HIA) economist Geordan Murray stressed that any shift in demand for different types of renovation work resulting from the long term trend toward multi-residential dwellings would be gradual, but would likely be conducive to an increasing focus on remodelling of existing space such as kitchens and bathrooms as opposed to adding new floor space.

“Looking broadly across the market, the change we are seeing now in the composition of new home building is that we are starting to see a significant shift toward a higher share of multi-units,” Murray said.  “We are talking about a gradual change over the long term.”

“If we drill down and look at the types of renovations that are typically going to occur in a multi-unit complex, they are much more limited because you are generally constrained by a smaller footprint depending on the type of unit. If it’s a high rise apartment, for example, you are generally constrained by your four walls, so you are limited to what you can do within those four walls.”

He noted that this means updates to multi-unit dwellings are more likely to be cosmetic, as opposed to additions of another storey or expanded floor space.

“Depending on the construction that has been used to build the apartment, you might be able to move some walls around to remodel living areas, but you are not going to see the same sort of growth in second storey or bigger floor plans that you would see if the number of dwellings that we are seeing built were all detached,” he said.

Murray’s comments follow HIA’s publication last week of a research note in which it examined not only broader economic factors affecting the overall picture regarding renovation work but also a number of factors affecting demand for different types of work.

Along with the aforementioned shift toward higher density dwellings, the HIA noted, for example, that some impetus from the market might be driven by retiring baby boomers reaching the age where they can access their superannuation and thus finance dwelling upgrades.

Jobs which seek to bring older housing styles up-to-date with contemporary living preferences, meanwhile, are also significant. Kitchens and bathrooms are generally replaced every 10 to 15 years, the HIA notes, while floor plans with spare bedrooms and close integration of the kitchen, internal living spaces and external spaces are more popular today than they have been in decades gone by.

Overall, however, Murray said near-term renovation activity levels will be primarily determined by interest rates as well the direction of unemployment and the flow on effect into consumer confidence.

While acknowledging that unemployment may still have some way to rise, Murray said the HIA expects it to peak at around 6.1 per cent, and that conditions should be conducive to a modest pickup when it does stabilise and confidence returns.

“When households are more comfortable with their employment situation then they are more going to feel more comfortable in going into significant investment decisions like they do,” he said.

In its most recent forecast, the HIA said overall renovations activity throughout Australia most likely bottomed out in 2012/13 and will undergo a modest recovery over the next three to four years.

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