2021: the year of the renovation
HIA Economics also anticipates that medium-sized renovations projects, such as new kitchen and bathrooms, will grow in 2021. The restrictions on travel saw the number of established dwellings transacting in the market fall to record lows. These households have continued to age and still need to find new housing to meet their changing household dynamics. The catch-up from the delay in households, which are up- or down-sizing, could see a continuation of kitchen and bathroom renovations immediately before or after sale.
This bodes well for a further increase in renovations expenditure in 2021.
Adding to this, the number of large-scale renovations projects, supported by the HomeBuilder program, are now expected to exceed 10,000.
This surge in renovation activity will help support employment across the economy and occurs as we also see a strong volume of new homes commencing construction. This is driven, at least in part, by first home buyers as they make the most of a narrow window of opportunity to enter the market. This group is taking advantage of falling interest rates, slower house price growth, modest wage growth and the federal government’s First Home Loan Deposit Scheme.
While not specific to first home buyers, the Australian Government’s HomeBuilder program provides further opportunity for first home buyers to enter the new housing market. In some states, there are also additional incentives available to help first home buyers enter the market.
This cohort will also keep the renovations market ticking over for the next couple of years as they turn to upgrading their homes.
As with past recessions, the housing industry will support the economy out of this one. But like we saw after the GFC, this level of government expenditure comes with a cost, which is a likely downturn in activity in about two years’ time. At this point, the housing industry will need a strong national economy and strong population growth to help pull the housing sector forward.