Renovating hits record $6.5bn
Household renovations are booming in Victoria, with spending topping $6.5 billion in just 12 months.more......
Renovating hits record $6.5bn
29/01/2009
Household renovations are booming in Victoria, with spending topping $6.5 billion in just 12 months.
This is almost double the investment 20 years ago. High stamp duty costs associated with moving and confidence in household values are driving the renovation bonanza, according to the Housing Industry Association's chief economist, Harley Dale.
It was not unusual to see people spending around $150,000-$250,000 on a big structural extension of their existing property, rather than moving house, he said.
Stamp duty payable on a median-priced home in Melbourne is about $20,000, and Mr Dale said that had a big impact on deciding whether to renovate or move. He said renovation spending included everything from a can of paint at the local hardware store to adding a second storey.
The renovation market had proved resilient even under increasing household financial strain.
"A lot of it is driven by owner occupiers who simply do their sums and think, well, the value of my block of land is pretty high, I am going to incur lots of transaction costs moving house, maybe I will just renovate what i have got" he said.
He said that despite some general pessimism about the housing market, Melbourne property values remained strong. Mr Dale said spending on renovations as a proportion of the housing industry had grown sharply.
"The renovation market is about 48% of the total housing market now", he said. "If you go back 30 years, it was only about a quarter of the market."
Mr Dale said the surging renovations industry was driven largely by property owners who had been in their house for some years. "So they are a little bit more resilient to the higher intererst rates," he said.
"They have got good job security and their house price is going up, so they are spending money on renovating."
Although "sustainability renovations" were still at the margins of the renovation industry, Mr Dale expected significant growth in fitting homes with energy and water saving improvements of the next decade.
The Real Estate Institute of Victoria's chief executive, Enzo Raimondo, said the institute would have a better picture next weeek of how the entire housing market was performing.
