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Renovations activity results

According to the HIA, the full effect on renovations activity in Australia has become clearer over the course of 2012. Source: Timberbiz

In the past year, as households started to settle into this post-GFC era, total renovations investment showed a sharp deterioration.

The decade between the mid-90s and the mid-2000s was characterised by rapid growth in total renovations investment to unprecedented levels, largely maintained to the end of 2011.

One of the major shifts experienced in Australia’s economic environment since the GFC has been heightened consumer caution. This is demonstrated by the protracted weak consumer confidence measures and also the increased household savings rate – now at around 11%, compared with a negative rate just prior to the GFC.

Since the GFC, cautious households have sought to pay down debt more quickly and it appears that renovations have been a casualty of this deleveraging process.

Households were accustomed to renovating in a rising dwelling price market where they could borrow against rising equity.

The HIA said that flat December results in total renovations investments represented a stabilisation to lower levels of activity that will be continued into the medium term. It expects that following the sharp decline suffered in 2012, total investment into renovations will rise by a modest 1.9% to $29.0 billion in 2013 and remain around this level into 2015.

Looking specifically at the value of major alterations and additions (jobs with an approval value of $10,000 or more), the value of these council-approved jobs has been quite volatile in recent months.

The month of February 2013 saw the value of approvals reach a decade high following two weak months. As a result, the value of approvals over the three months to February 2013 was a marginal, 0.5% higher than in the previous three months. This level represents a 5.7% increase on the value of approvals in the three months to February 2012.

The full report is available at –
www. economics.hia.com.au/media/Renovations%20Activity%20-%20May%202013%20Research%20Note.pdf