Reno boom will see more Aussies spend big on their homes
More homeowners Australia wide will improve rather than move over the next three years during a predicted renovation boom fueled by low interest rates, prohibitive stamp duties, and a desire to stay in their suburb.
If you’re planning a renovation, you may want to lock in a builder sooner than later, as the number of homeowners choosing to improve their property is predicted to significantly increase over the next three years.
According to the Housing Industry Association (HIA) and Master Builders Australia (MBA), Australian homeowners will collectively spend more on improving their homes in 2018 than the previous six years, to the tune of $8.8 billion this year, up from $8.3 billion in 2017.
In fact, many homeowners have already kick started their renovations, with the MBA recording a spike in the number of alternations and additions work in the pipeline in 2017.
“This renovation boom will provide a much-needed lifeline for small building businesses outside of Melbourne and Sydney who have seen the new housing construction side of their business struggle in the last few years,” says MBA’s national manager of economics Matthew Pollock. The boom will make a significant contribution to the growth of the construction industry, with the HIA forecasting an increase in the value of home renovations by 5.7 per cent from $32.5 billion to $35.6 billion by 2020 and the MBA predicting a $44 billion industry by 2023.
With construction of new homes predicted to decrease over the coming years, this increase renovation activity has come at the right time for many building businesses.
“After three years of unprecedented growth in new home construction, in which 200,000 new homes were built, renovations will pick up as the pace of new homes slows,” says Pollock.
Approximately 30 per cent of homeowners spend between $70,000 and $200,000 on upgrades, a third of which are on new kitchens*
The renovations boom is also forecast to reach beyond the largest east coast cities. “In fact, while the boom in new dwelling construction has been centred on the Sydney and Melbourne markets, this is forecast to be reversed with the boom in renovation work,” says Pollock, who predicts growth to be the strongest in South Australia, Western Australia and Queensland.
What’s driving the renos?
It’s been a decade since Australia’s last renovation boom which was driven, according to HIA principal economist Tim Reardon, by the federal government tax concessions and handouts from the GFC in 2008.
Pollock attributes low interest rates, tax advantages in reinvesting in your own home, prohibitive stamp duty and a preference to stay in the same suburb as fueling this current renovation boom. The HIA also acknowledges the healthy labour market conditions in the larger cities and the price of houses in Sydney and Melbourne as contributing factors to the renovation boom.
HIA senior economist Shane Garrett, however, credits the growing number of 30- to 35-year-old detached houses which are ripe for renovation as the biggest driver of the boom.
“Between 2017 and 2020, the number of houses in this key age bracket is set to expand by 8.3 per cent as a result of the record volume of new detached house building in the late 1980s,” says Garrett, who also reveals that it’s the new owners of an older home that are more likely to renovate it than the previous long-term owners.