Renovation market cooling from record peak

The Housing Industry Association (HIA) provides many reports and analysis on the building sector throughout the year which can be a handy barometer for how the industry is tracking and any quirks that may arise.

The recent HIA Kitchens and Bathroom Report provides a unique insight into this important sector of Australia’s residential construction industry and wider economy.

The report highlights that affordability and value have become stronger considerations for households looking to renovate or build a new kitchen or bathroom.

HIA chief economist Tim Reardon said that the size of a typical bathroom has fallen as home renovators and builders scale back their renovation ambitions.

“Shrinkflation is evident across the economy as households bear the cost of higher mortgage repayments, and home renovations are no exception,” Mr Reardon said.

The report notes that this adjustment in consumer behaviour is evident in bathrooms more than kitchens.

Each new home built in 2023 has on average two bathrooms, down from 2.6 per home in the previous year.

It also shows that the building and renovation boom in recent years saw kitchens increase in size, with more appliances and premium fittings. As homeowners spent more time at home, they also spent more money on their home renovation.

Mr Reardon said that overall, the renovations market is cooling from the record peak of recent years but remains strong due to the low level of unemployment, house price growth and limited quality housing stock available to purchase.

“During the pandemic, the cost of a new kitchen or bathroom rose as households sought larger living and work from home spaces.

“The cost of a new kitchen and bathroom is continuing to rise, but this time it is due to higher construction costs.”

The report also shows that renovation jobs have also been constrained, with a large majority of bathroom jobs involving the same or even smaller footprint.

In contrast, the majority of kitchen renovations in 2023 resulted in an increase in the footprint of the kitchen.

Mr Reardon said that the cost of construction will stabilise this year as global supply chains are restored, and labour shortages ease.

“There is strong pent-up demand for housing amid record high population growth and a strong renovations segment.

“This bodes well for a solid volume of home renovations activity in the years ahead, albeit, below the level observed in recent years,” Mr Reardon concluded.