WA housing renovation market still weak

HIA forecasts show it could take a couple of years for the WA housing renovation market to recover despite the stock of 30 to 35-year-old houses increasing.

THE housing renovation market in Western Australia has been less active this year but is expected to return to growth within the next two years, according to the Housing Industry Association.

The latest edition of the HIA Renovations Roundup Report said the Western Australian renovations market appeared to recover in late 2015 and early 2016, but had since gone into reverse.

“Total renovations work in WA fell by 4.4 per cent in the June 2017 quarter to $879 million, a level that is 16.8 per cent lower than a year earlier,’’ the report said.

“Nevertheless, the stock of houses of ripe-renovation age (30-35 years) in WA is set to expand very substantially out to 2020, providing the foundations for a recovery in the state’s renovations market.

“Given the weak start to the year, we estimate that renovations activity in WA will fall by 13.4 per cent in 2017 followed by a more moderate decline of 2.9 per cent in 2018, a year we are forecasting to represent the trough in the cycle.

“We expect activity to return to growth in 2019 (+6.6 per cent) followed by further increase of 4.7 per cent in 2020, taking the value of renovations activity in WA to $3.91 billion.’’

The report said in August Perth house prices were down by 2.8 per cent year-on-year and down by 1.6 per cent over the quarter.

In July renovation lending was down by 9.8 per cent compared with the same period 12 months earlier.

But major renovation approvals were up by 7.6 per cent compared with the same period last year.

In August the unemployment rate had fallen from 6.2 per cent to 5.6 per cent during the past 12 months.

Total employment was up by 2.1 per cent year-on-year while full-time jobs increased by 4.0 per cent.

Established house sales in August were down 41 per cent on a year earlier.

The report said from 2017 to 2020 the stock of 30 to 35-year-old houses was projected to expand by 22.3 per cent.

From 2020 to 2023 the number of houses in that bracket was set to decline by 2.7 per cent but forecast to rise by 5.5 per cent during the 2023 to 2026 period.

Nationally the association said the housing boom in the late 1980s was set to provide big opportunities in the renovations market during the next decade.

The association’s senior economist Shane Garrett said the analysis showed a strong correlation between the volume of renovations work and the age of the housing stock.

“The more houses between 30 and 35 years of age, the greater the need for renovations and improvements,’’ he said.

“The really good news is that the number of houses in the key renovations age group will increase substantially over the next decade – a result of record volumes of detached house building during the late 1980s.’’

HIA’s updated forecasts for the national home renovation market indicate activity will increase by 0.2 per cent during 2017 with a further small increase 0.4 per cent during 2018.

In 2019, the pace of expansion is predicted to accelerate to 4.9 per cent with a further rise of 2.9 per cent in 2020 bringing the value of Australia’s renovations market to $35.12b.