Amid an environment of low interest rates, stronger house prices and an increasing number of houses entering the age group in which home owners opt to update their homes, the renovation sector in Australia is on the comeback trail.
Having bottomed out at $28.754 billion in 2013, the dollar value of investment going into renovations activity grew by 4.6 per cent in 2015 after having edged up by 1.2 per cent in 2014, the Housing Industry Association says in a new report.
Leading the way are the Australian Capital Territory, Western Australia and Queensland, where activity grew by 11.4 per cent, 10.3 per cent and 8.8 per cent in 2015 respectively.
Respectable levels of growth were also seen in the Northern Territory (4.5 per cent), Tasmania (four per cent) and Sydney (3.5 per cent).
Whilst conditions in Victoria have flat-lined, meanwhile, activity in that state remains at high levels compared with historic standards.
Going forward, the HIA expects activity to increase by a further 5.4 per cent over the next three years to reach $32.002 billion by 2018.
Housing Industry Association senior economist Shane Garrett said the recovery is being driven by a number of factors.
In addition to the low level of interest rates, the growth in house prices in places like Sydney and Melbourne is both increasing the equity base upon which home owners were able to draw and simultaneously making the option of renovating more attractive from a cost perspective as opposed to moving house.
In addition, a significant number of houses were approaching an age at which renovations of kitchens and bathrooms are generally common, he said.
“A significant portion of the work that is done in homes is in the 10-to-20-year age group,” Garrett said. “Because of the fact that building activity was quite low from the early 1990s to the year 2000, that (a lack of homes in this age bracket) took its toll on renovations activity earlier in this decade.
“Now, the number of detached houses in that age group is starting to creep up again. It will continue to do so for another seven to eight years.
“So there are more houses now that are reaching that age group. This we think will contribute toward activity moving forward over the next few years.”
In terms of the type of work being done, basic repair and maintenance jobs were the most common followed by work on bathroom and kitchen renovations, which accounted for 16.2 per cent and 15.9 per cent of jobs respectively.
More than eight in every 10 jobs were done on detached housing, whilst the highest proportion of jobs in terms of monetary value (24 per cent) fell within the $12,001 to $40,000 price bracket.
A significant trend, also, revolves around home owners completing knock-down rebuilds as opposed to major renovations; almost two-fifths of HIA members surveyed said they had detected a trend in that area.
Speaking of the popularity of kitchen and bathroom remodeling, Garrett said this is largely being driven by a desire to update these areas from a period during which the design focus revolved primarily around functionality toward a more modern setting involving a greater emphasis on comfort and aesthetics.
“With many of the homes that were built in the 1960s, 70s and 80s, people’s requirements for kitchens and bathrooms back in those days were a lot different to what they are now,” he said. “People nowadays like their kitchens and bathrooms to be comfortable and pleasant. In the old days, they were seen as more of a functional part of the house.”