Australians are beginning to put more money into extensive home renovations, prompting a fragile recovery for the market, the Housing Industry Association’s latest Renovations Roundup revealed.
Although the renovations market is expected to grow in coming years, with repairs and maintenance the most popular jobs, followed by revamping kitchens and bathrooms, HIA Senior Economist, Shane Garrett explained that “the recovery remains quite fragile.”
“Several markets are benefitting from the improving labour market along with stronger dwelling price growth. In other places, weak earnings growth, relatively low turnover of established houses and tighter credit conditions are holding activity back,” he added.
Garrett said that total renovation activity increased by 4.4% in 2015, rising for the second consecutive year. This year, it’s expected renovations activity will grow by 0.7%, rising to 1.7% in 2017. Even bigger increases are projected further in the future, with 2018 expected to see a 2.8% growth and 2019 increasing by 3.2% - bringing the total value of renovations to an estimated $33.02 billion.
“A significant 24% of renovation jobs fall within the value range of $12,000 to $40,000,” Garrett said. But how are Aussie renovators paying the bill on spends like this?
Mozo’s loan repayments calculator showed that renovators choosing to foot a $40,000 bill through a personal loan with the average interest rate of 8.4% would pay $5,391 in interest over a 3 year period. If, on the other hand, they were to shop around for the lowest interest rate in Mozo’s database, of just 4.5%, the savings are significant, representing around $2,555.
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Garrett added that, “the survey also found that 13% of renovation jobs fell in the range of $200,000 to $400,000. This reflects demand for comprehensive renovation work which covers a large part of the footprint of an existing house and is an area of the renovations market that should gather momentum in coming years.”
With these higher price tags, renovators may be better off looking at a refinancing home loan. While a loan of $400,000 at the average rate of 4.71% would add another $281,383 onto a renovation bill in interest on a loan period of 25 years, there are still significant savings to be found. By shopping around for the lowest rate - jut 3.94% - renovators could save $51,948 in interest on their $400,000 loan.