Low wages growth constrains renovations activity

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Renovations activity is expected to decline this year, before bouncing back in the years ahead, according to a new survey of renovators.

A Housing Industry Association (HIA) survey of 210 renovators found that renovations activity is likely to decline by 0.2 per cent this year.

However, it is then forecast to expand in 2018, 2019 and 2020.

Renovations activity slumped 16.6 per cent between 2011 and 2013, before rebounding in the years after.

Year Growth
2014 1.0%
2015 4.0%
2016 1.0%
2017 -0.2%
2018 2.6%
2019 2.3%
2020 2.4%

Most renovations cost less than $40,000

The survey also found that most renovations are conducted by a large number of small operators completing relatively small-scale jobs.

Repairs and maintenance jobs still account for the largest single share of activity.

Contrary to perception, only 28 per cent of respondents said there was a trend towards homeowners completing knock-down rebuilds rather than engaging in major renovations. The other 72 per cent felt no such trend existed.

Here is the breakdown of renovation jobs (excluding GST):

Value Share
Less than $5,000 1%
$5,001 to $12,000 35%
$12,0001 to $40,000 30%
$40,001 to $70,000 4%
$70,001 to $100,000 14%
$100,001 to $150,000 2%
$150,001 to $200,000 4%
$200,001 to $400,000 7%
More than $400,000 3%

Queensland leading the way for renovations


The market for renovations has been supported by very low interest rates as well the strong rise in property prices in key markets over the past five years, according to the HIA.

However, the HIA said other factors have constrained activity – slow economic growth, low wages growth and rising debt-to-income ratios.

“There are challenges ahead. However, our medium- to long-term outlook for the renovations market is buoyed by the fact that the number of detached houses entering the key renovations age group will continue to rise steadily for the next few years,” it said.

Here is the state-by-state forecast:

State 2017 2018 2019 2020
NSW -3.0% 1.6% 1.2% 2.4%
Victoria 5.2% -1.3% 1.1% 0.9%
Queensland 0.6% 8.8% 3.1% 3.6%
Western Australia -2.9% 2.6% 5.2% 3.4%
South Australia -2.4% 0.7% 2.6% 2.2%
Tasmania -2.2% 2.8% 2.0% 2.7%
Northern Territory -4.7% -2.6% 2.4% 2.3%
ACT 4.1% 1.6% 1.5% 0.4%

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