Trade Opportunities Shift to Home Renovations 1

By
Wednesday, October 12th, 2016
liked this article
Embed
Green Building Council Australia – 300 X 250 (new ad)
advertisement
renovation
FavoriteLoadingsave article

Australia’s home renovations market has emerged as a critical area of opportunity for residential tradespeople amid expectations of a pullback in new home building activity, according to the latest report.

In the most recent edition of its Renovations Roundup report, Housing Industry Association said it expected the dollar value of renovations investment to grow by 4.7 percent for $30.454 billion in calendar to come in at $31.381 billion in calendar 2016 before going on to reach $32.576 billion over the next two years.

This is well up on the $28.754 billion worth of renovations investment which occurred as recently as calendar 2013.

The comeback is also reflected in sentiments of builders on the ground.

Whilst more than half (51 percent) of all builders surveyed by HIA indicated that renovations activity was around the same as last year, those who say they are busier with renovations work now (38 percent) outnumber those who say that activity is lower (11 percent) by a factor of around 3.5 to one.

Going forward, those expecting market conditions to be stronger in a year’s time compared with today (26 percent) also outnumber those who expect conditions to be weaker (6 percent) by a factor of more than four to one.

construction

In terms of type of work, the report shows that kitchen renovations (26 percent), repairs and maintenance (24 percent) and bathroom renovations (13 percent) are the most common forms of work done, accounting for more than six in ten of all jobs in total.

Larger work, such as ground floor extensions (7 percent) or multi-floor extensions (7 percent) comprised only 14 percent of all work done.

Tradespeople and small business are reaping the rewards.

Asked which subcontractor groups they had used within any of their jobs over the past three months, 90 percent said they had used electricians, whilst 87 percent, 77 percent, 75 percent, 70 percent and 68 percent said they had used plumbers, plasterers, carpenters, painters and tilers respectively.

Meanwhile, the survey also indicated that more than three quarters (78 percent) of those firms who were involved in renovations work were either sole traders or were businesses which employed five or less people.

HIA Senior Economist Shane Garrett said momentum in kitchen and bathroom renovation work was being underpinned by a number of factors.

First, current trends are geared toward jobs of more modest expense which typically do not require municipal approvals or extensive bank loans, he said.

Whereas major extensions might cost north of $100k, Garrett says kitchen and bathroom renovations are more likely to fit within the $15k to $35k range which suits most renovation budgets at the moment.

Second, whereas a significant number of homes today still had bathrooms from the 1950s to 1970s era in which these types of rooms were viewed from more of a functional perspective, modern trends around kitchens and bathrooms place a much greater emphasis upon beauty and comfort.

A significant number of kitchens and bathrooms were now being updated to reflect this, Garrett said.

Finally, strong levels of building activity in the early 2000s mean the volume of housing stock which is now approaching the ten to twenty-year age bracket during which the first kitchen and bathroom renovation is statistically most likely to take place is growing, Garrett pointed out.

More broadly, Garrett said wider economic factors were underpinning stronger renovations activity more generally.

Thanks to a combination of lower interest rates and rising dwelling values in Melbourne and Sydney (and thus rising levels of home equity), the capacity of households to finance renovation work was on the rise.

Those rising house prices, along with consequential increases in relocation costs such as stamp duty, were also serving as a disincentive on the part of households to relocate and thus were prompting a number to consider instead improving their existing space, he added.

Garrett said the aforementioned prevalence of smaller businesses within the renovations sector of the market means that the benefits of improving renovations activity will be felt by a variety of tradespeople across the spectrum.

“One of the good things about the impending upswing of renovations activity is that the benefits tend to be spread out and diffused quite widely across the housing industry,” Garret said.

“When you get renovations activity going, the fact that the jobs are concentrated in the small to medium bracket (of businesses) means that all of that expenditure (on the renovations market) is shared out amongst a very large number of people.”

“We think that small business within the residential sector is likely to be the big winner.”

Nevertheless, he cautions that with renovations typically comprising only around one-third of the market, the upturn in activity in this area will not be of a sufficient magnitude to compensate for the anticipated pull-back within the market for new home building.

“With the lower amount of output we expect in the new home building side over the next while, it won’t be offset by renovations work – renovations work will only offset it a little bit,” Garrett said.

“The biggest thing we will see (from the impending new home building downturn) is that less work overall in residential construction is being done.”

“Renovations will have a little bit more of the cake but it won’t be a dramatically larger slice.”

Embed
FavoriteLoadingsave article

Comments

 characters available
*Please refer to our comment policy before submitting
Discussions
1
  1. Jane Bringolf

    It is little wonder that the Livable Housing Design Guidelines (which the HIA publicly supports) remain just a concept. Why would they promote the idea of more accessible homes in the new home market when they can make people pay twice for a home that will suit them as they age or to suit their older visitors. Renovations and modifications cost a heap more if done afterwards and next to nothing if included in the design stage. Only talking the key structural features: step free entrance, slightly wider doorways and minimal hallways.