Renovation spending to keep rolling in Australia

Household savings and full employment are set to underpin strong renovation activity over the coming years, despite rising costs and labour shortages.

Strong renovation activity is unlikely to slow anytime soon as cashed-up homeowners forge ahead with home improvements, which are proving popular with buyers shy to roll up their sleeves due to high costs and delays.

The amount of renovation ­activity around the country surged to a record high through the pandemic as people spent more time in their homes than ever before and the HomeBuilder stimulus from the federal government encouraged people to make a change.

Alterations and additions data from the Australian Bureau of Statistics showed all the work under way totalled $918.8m through February, even after a 6.4 per cent monthly fall.

Housing Industry Association chief economist Tim Reardon does not expect a slowdown in the level of activity despite supply chain pressure on products including timber and plasterboard, labour shortages and continually increasing costs.

CoreLogic’s latest residential construction index found costs had risen 9 per cent over the past 12 months to March. The increase was the fastest on record outside the introduction of the GST, which caused a 10.2 per cent ­annual spike.

The underpinning of demand would all come down to lifestyle and increased household savings and home equity, Mr Reardon said.

“Like all other indicators in the market, renovation activity is astronomically high; we did not conceive that it could be this high prior to Covid,” he said.

“All indications are that it’s staying there. Four per cent unemployment, returning wage growth, households with lots of money on their mortgage offset account, higher density in ­detached housing … there’s no downside.”

It took Brisbane homeowner Alison Bertwistle six months ­before she could secure Gino ­Yilmaz to paint her property at Ascot, on Brisbane’s northside, which was the same length of time it took to bring in a cabinetmaker and a plumber. With long lead-times that have been exacerbated by recent flooding, she and husband Paul are scrambling to get their home ready for sale next month. “All up, waiting for all the trades, the renovation probably took close to a year,” Ms Bertwistle said.

Over the past few months, prestige agent Christine Rudolph, of Ray White New Farm in Brisbane, has noted that these struggles have seen buyers become more focused on completed projects and new homes in order to avoid the stress.

“It works out to be more cost effective to buy the completed property than to buy vacant land or something to renovate,” said Ms Rudolph, who is preparing to list Ms Bertwistle’s home soon. “People are just saying ‘I can’t be bothered’ and are scrambling for those finished homes.”

New US data from the National Association of Realtors found sellers could recover 118 per cent of the costs of new wood flooring and more than 70 per cent of a complete bathroom or kitchen upgrade.

On the other side of the equation, those buying with dreams of flipping for profit or lifestyle are getting a shock.

Nelson Alexander agent Arch Staver, in Melbourne's trendy Fitzroy, said buyers were realising the cost of renovating is so high that they are willing to sell their unrenovated houses and compromise for something already completed or in another location.

“I’m having so many conversations with vendors at the moment who are almost needing counselling after getting tenders back from builders where costs are up to 70 per cent higher that expected,” Mr Staver said.