Western Australians are spending more on home renovations than ever before, as the combined effect of rising house prices and building delays flows through the sector.
Western Australians are spending more on home renovations than ever before, as the combined effect of rising house prices and building delays flows through the sector.
The Housing Industry Association forecasts renovation investment to grow by 7 per cent this financial year to a record $2.8 billion, and expects the level of investment to be sustained over 2007-08.
HIA WA executive director Sheryl Chaffer said many people were choosing to pour money into home renovations instead of moving, to improve the value of their assets.
“The record spend in this sector is a symptom of Western Australians having more employment opportunities and cash in their pockets, coupled with rising land values, high stamp duty and the sheer cost of moving house,” she said.
According to the HIA’s June economic update report, Perth’s housing affordability in early 2007 was 29 per cent lower than a year earlier and affordability was down by 22 per cent in the rest of WA.
Despite strong housing market conditions, the unprecedented level of investment in renovations has been good news for WA retailers and suppliers who are trying to keep up with demand.
Homebase Subiaco general manager Trevor Smith said the renovations market was much bigger than the “official picture”, as many people were spending cash on projects, rather than seeking finance.
Mr Smith said renovators did not need a building permit for work up to a value of $20,000 and these projects often went under the radar.
“Business is at 100 per cent capacity and there really is no end in sight,” he said.
“People have more equity in their homes now, and if they like the suburb, they’re more likely to stay where they are and upgrade or extend.”
Mr Smith said one Cottesloe resident had recently spent $100,000 on a new kitchen with two ovens, refrigerator draws and an instantaneous hot water system.
New kitchens, double ensuite bathrooms, entry doors and extensions are understood to be the most popular renovation projects, with a host of new suppliers entering the market to get a piece of the action.
Mr Smith said there was an eight to 10-week waiting list of new suppliers seeking to showcase their wares, and Homebase was preparing to expand its display centre by an extra 500 square metres in response.
Master Builders Association housing director Gavan Forster said that, in five to 10 years’ time, the renovations market was likely to be bigger than the new housing sector.
“A lot of the old 1960s and 1970s housing stock in places like Palmyra, Greenwood and Midland have a 40-year lifespan and are ripe for upgrading,” he said.
Mr Forster predicted continuing modest growth while people enjoyed the capital gains tax-free status of renovations to the family home and the lifestyle benefits that it afforded.
Ms Chaffer said the strong levels of growth in renovation spending WA had experienced over the past two years would ease over 2008-09 in line with a general softening of the property market and weaker economic estimates.
