Spending surges on renovation supplies

November 6, 2012
The Age

If you’ve noticed a few more weekend warriors sprucing up their homes, you are probably not alone – spending on hardware, building and garden supplies increased by 4.9 per cent in the September quarter, the largest quarterly gain in five-and-a-half years.

The figures are being touted as further evidence of the popularity of mini-makeovers.

“People have, on the one hand, certainly pulled their heads in when it comes to the larger-scale, larger-value renovation jobs,” says Housing Industry Association chief economist Harley Dale. “But there’s quite a bit going on at the lower end of the market, where people are engaging in more modest upgrades, maintenance and small renovation jobs.

“It’s all consistent with people being in a somewhat more cautious mindset than they were pre the GFC.”

Dale says homeowners are “hunkering down a little bit more and in that circumstance people … naturally look around and think about what they might be able to do to improve their existing property”.

The trend should continue into 2013.

“I would expect that the process of household de-leveraging, which is getting so much focus at the moment, probably has some way to run, which means that there’s probably a bias in there in terms of people’s spending behaviour towards still looking closely at those smaller-value renovation jobs,” says Dale.

“You would think there is probably a tick in the box for those same retail sectors continuing to grow reasonably well in 2013.”

However, interest rates approaching historic lows in the past year could spark the desire to undertake bigger changes.

“There is a reasonable correlation between lower interest rates and people’s willingness to spend on larger renovation jobs as well, and there is some sign that there is a bit of a bottoming out in that larger renovation cycle,” Dale says.

“So maybe in 2013 we see a continuation of people engaging in smaller jobs at the same time as we see a modest recovery emerge in the larger renovation jobs as well.”

The figures come at the same time as spending at department stores fell by the largest proportion in seven years.

“Hardware and garden outlets appear the big winners in the current environment,” says Commsec chief economist Craig James.

“That certainly lines up with recent data on building approvals showing renovation approvals at record highs in trend terms.”

The Australian Bureau of Statistics figures reveal that while retail spending rose by 0.5 per cent in September, retail trade fell 0.1 per cent in real (inflation-adjusted) terms over the three months to the end of September – making the spending on building, hardware and garden supplies stand out even more.