When HIA’s Economics team recently analysed the state of the kitchen and bathroom industry, it became clear that factors shaping the broader housing market and, indeed, the entire economy are predominantly at play.

One of the biggest impacts on home building and renovations in recent years has been the pandemic. Not only did we see a record volume of work accumulated during this time, but also changes to homeowners’ perceptions and spending habits.

‘The results of a survey of renovation-focused builders across Australia show that, compared to pre-pandemic, people are demanding more bathrooms and better kitchens,’ explains Tom Devitt, HIA Senior Economist.

‘The pandemic has changed households’ relationship with their home. After so much time spent locked down and/or working from home, Australians are putting a higher value on their home environment, demanding more space and amenity.’

The HIA Kitchens & Bathrooms Report 2022/23 gives an overview of past growth and future prospects. We take a look at some of the biggest takeaways from this important annual summary of projected activity in this sector of the home building market.

Renovations remain buoyant

Believe it or not, Australians use online renovation search terms more than almost anyone else in the world, sitting only behind New Zealand and Singapore. Whether prompted by an interest in changing trends or general wear and tear, we are enamoured with a home refresh. And when it comes to renovations, there’s a significant chance the kitchen and/or bathroom is part of the equation.

‘Renovation activity surged to record levels early in the pandemic on the back of low interest rates, the inability to travel overseas and more time spent at home,’ Tom says.

According to analysis from the report, the Reserve Bank of Australia’s tightening cycle, combined with ballooning construction costs, will see new renovation work slowing over the next couple of years. Nonetheless, this is from a record high, with ample renovation work still in the pipeline.

‘Activity is likely to remain elevated, while the detached housing market declines,’ Tom explains. ‘This is because renovations are an attractive alternative when rising interest rates and construction cost blowouts are making the new house market increasingly unaffordable.’

Extreme weather events in a number of states have also resulted in the need for home repairs, which can also catalyse decisions for broader renovations. ‘The increasing costs associated with new home building, combined with the pandemic trend towards home improvement, will also continue to support demand for such renovations,’ he adds.

Kitchen quality in focus

On the back of the home building boom, Australia has seen kitchen installations surge in recent years. After a 24 per cent increase in 2020/21, new kitchen installations moderated back down by 3.1 per cent, though still recording a significant figure of 207,800.

The value of kitchens installed in new homes spiked even more significantly during the pandemic, up by 76.4 per cent in 2020/21, and a further 1.8 per cent in 2021/22 to a new record high of $7.8 billion. Homeowners are looking at increased quality in materials and functionality. ‘While a single kitchen is still sufficient for most homes, owner occupiers are improving their home environment with the purchase of higher-end kitchen finishes and appliances,’ Tom says.

The report indicates that the current detached housing boom is expected to unwind steeply, under the weight of higher interest rates and construction cost blowouts, while multi-unit construction is expected to pick up only modestly.

New kitchen installations, and the value therein, are, consequently, also expected to moderate further, with the number down by 9.9 per cent, 2.7 per cent and 1.5 per cent in the next three years to a trough of 179,600 kitchen installations in 2024/25. The value of kitchen installations is expected to drop back in 2022/23, down by 27.4 per cent to a trough of $5.6 billion.

Bounteous bathrooms

With Australians spending more time at home, there has been an increase in the average number of bathrooms in a home, up from 2.2 in 2019 to 2.6 in 2022. Part of this increase comes from the population shift away from apartments to larger detached homes. Naturally, these homes have higher occupancy and more bathrooms.

The renovation cycle also shows that homeowners are refreshing or fully upgrading their bathrooms sooner. These have changed from 17 years pre-pandemic to less than 14 years in 2022. This may be a short-term trend that will unwind over the course of the decade. Nonetheless, it has added to the large pool of renovation work currently underway.

‘The value of new bathroom installations also spiked in 2021/22, albeit more modestly than the number of bathrooms. The first two years of the pandemic saw the number of new bathroom installations increase by 26 per cent and 22.1 per cent to 542,600 new bathroom installations in 2021/22, a record high. The value of bathroom installations saw a single year increase, up by 24.2 per cent to $6.5 billion in 2021/22,’ Tom says.

The more modest increase in value, following a decline in 2020/21, could be due to various factors, such as consumers choosing lower-end products and finishes compared to those in their kitchens, and supply chain constraints restricting the number of products available.

Order HIA’s latest report

For more data and information, including a drill-down state by state, download the full HIA Kitchens & Bathrooms Report 2022/23.

First published on 21 April 2023