Home reno boom to continue

According to an industry outlook report released by IBISWorld, home renovation activity will surge in the final days of the HomeBuilder package and will continue to grow over the next five years.

The HomeBuilder incentive has an application submission deadline of mid-April but contracts must be signed by March 31, 2021, in order to qualify for the package.

IBISWorld Senior Industry Analyst, Suzy Oo, said the grant has revived some confidence among first-time and existing homeowners to re-enter the residential property market or carry out home improvement works.

“Several factors have fuelled the renovation boom, including increased time spent at home, greater savings, favourably low interest rates, the rise of home renovation influencers and the need to make additional spaces for working or studying from home,” she said.

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IBISWorld’s research showed that private expenditure on home alterations and additions rose by 7.6 per cent and 5.2 per cent in the September and December 2020 quarters respectively. These increases were the highest since March 2014, suggesting that Australians are undertaking major home improvements.

This appears to be in line with HomeBuilder criteria which states that the value of renovation work must fall between $150,000 and $750,000 in order for a homeowner to qualify for the extended $15,000 HomeBuilder grant.

Not surprisingly, the uptick in renovations has boosted homeowners’ demand for tradespeople. However, the current tradie shortage is likely to force some consumers to carry on their renovations without skilled specialist contractors, IBISWorld’s Oo said.

“This is where Instagram-inspired renovations play a major role in making DIY home improvement projects easy for people,” she said.

“Many home renovation influencers offer online classes, which appeal to housebound individuals seeking to revamp their homes without going over their budget.”

The report also showed the renovation boom providing much-needed support to construction-oriented industries, which have been hit hard by the COVID-19 pandemic, but that will soon wear off.

“Revenue across the construction division is expected to decline by 7.2 per cent in 2020-21,” Oo said.

“While revenue for the House Construction industry is expected to rise by 10.6 per cent in the current year, revenue for other industries, including Wooden Structural Component Manufacturing, Hardware and Building Supplies Retailing and Hardware Wholesaling, is expected to contract,” she said.

On average, renovations can cost close to $63,000, and renovators in more populous states such as Victoria and New South Wales are likely to face relatively higher expenses that exceed $65,000, IBISWorld said.

Labour shortages across the Electrical Services, Plastering and Ceiling Services and Carpentry Services industries also lifted renovation costs by up to 15 per cent in 2020-21, prompting some potential renovators to reassess their finances.

“Larger projects generally require skilled tradespeople, such as electricians, carpenters and plumbers, while households can save on the cost of trades for minor alterations that can be executed by themselves,” Oo said.

Looking further ahead, dwelling commencements are forecast to decline at an annualised 3.1 per cent over the five years through 2025-26, including a fall of 12.1 per cent in 2021-22, as government incentives dry up.

“Dwelling commencements for both detached homes and multi-units are anticipated to decline in the short-term before returning to growth,” Oo said.

While dwelling commencements are set to decline, revenue across the House Construction industry is expected to be supported by solid growth in renovation demand. Home renovations are expected to account for 24.5 per cent of industry revenue in 2020-21.

“Rising household discretionary incomes are expected to enable greater renovation spending,” Oo said.

“In addition, property prices are forecast to grow at an annualised 3.7 per cent over the next five years, prompting more households to invest in renovation to improve the value of their homes.”

Profitability across the House Construction industry is projected to narrow to a low of 6.2 per cent of revenue in 2022-23, before recovering to 7.7 per cent of revenue by 2025-26.