Ripe for a change
In August, HIA forecast a decline in renovation activity as the economy entered a recession and households tightened their purse strings. Recent data suggests that there has actually been a significant surge in renovations expenditure, and this is likely to continue throughout 2021.
During the COVID period, Australians diverted funds typically used for travelling and eating out to savings and renovating their homes. Australian households undertook significant precautionary savings this year, with the household savings ratio reaching a peak of 22.1 per cent in the June 2020 quarter, up from just 3.7 per cent a year earlier.
This is the highest savings rate on record dating back to 1959.
However, the money isn’t sitting idle in bank accounts. For example, there has been an unprecedented boom in expenditure in hardware stores across the economy. Not all of this expenditure was on home improvements but retail expenditure at hardware stores, which typically covers lower value renovations activity such as minor kitchen and bathroom updates, decks and pergolas or DIY projects.
In the eight months between March and October, Australians spent 24.6 per cent more on ‘hardware, building and garden supplies’ than during the same period of the previous year. This jump was fairly uniform across the major states of NSW, Victoria, Queensland, South Australia and Western Australia (between +21.3 per cent and +28.4 per cent), with the Australian Capital Territory jumping by a standout 37.7 per cent (Tasmania and the Northern Territory had insufficient data for analysis).
Much of this additional expenditure on renovations has been at the expense of expenditure on tourism and ‘cafés, restaurants and takeaway food services’. Retail turnover overall is now 6.2 per cent up from pre-pandemic levels, while turnover in ‘cafés, restaurants and takeaway food services’ remains down by 15.2 per cent.