AUSTRALIAN HARDWARE JOURNAL
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2017 Hardware Suppliers & Industry Directory

BEGINNING

OF A NEW ERA

A new age in the home improvement and lifestyle market has

commenced amidst a challenging social and economic environment,

from a global and local perspective. In this year’s Review Preview,

industry analyst, Geoff Dart, investigates the year that was.

Firstly and globally, a wave of change, or chaos, is set to hit the

USA with Trumpism. Secondly, in the UK and Europe, there is

the possibility of Britain leaving the EU. However, this impact

is yet to be felt and may create uncertainty locally around the

value of the AUD. This will impact the following:

Immigration:

Foreign investors continue to see Australia as a safe

haven, while negative gearing contributes to increased house prices.

Interest rates:

Low rates have stimulated increase in debt and

household debt is now the highest on record.

Employment:

Local manufacturing is succumbing to global

labour and pricing levers, with most Australian retailers

increasing sourcing of goods from overseas.

Home ownership:

Declining home ownership amidst high

prices and investment is favouring super funds. There are also

increased fears of dying with debt.

Key stimulants to a healthy home improvement and lifestyle market

over the next decade include: new housing, renovations, additions

and alterations (R, A & A), home maintenance, increased household

formation, as well as a growing population and workforce.

The past year saw a record level of 220,000 new homes built, 52 per

cent of which were detached and 48 per cent which were multi-units.

Given population growth, household formation and the availability of

an estimated 50,000 homes per annum (and growing) being vacated

due to mortality, as well as elderly people moving into nursing

homes and retirement villages, there is a significant over supply.

As a result, the market will correct itself over the coming five

years, with new home builds declining and settling at around

165,000 per annum. This will largely be felt in the multi-unit

segment as over builds occurred in major regions of Melbourne,

Sydney and Brisbane. Multi-units remain at a lower average

price than detached houses and have not been a solution to

affordability and are unlikely to be, as they are different markets.

Hence the glut. Renovation activity grew by four per cent last

year, and as referred to in earlier market reports, will overtake the

value of new housing by year end 2018. CAGR is estimated at

four per cent over the coming decade.

PREPARE FOR CHANGE FROM 2026

Whilst the coming decade is expected to provide continued

momentum for the home improvement and lifestyle market,

change is on the way in terms of emerging needs of consumers.

Key drivers, briefly, include the following:

• Population growth of 1.7 per cent per annum; a combination

of natural and net migration. Melbourne leading the charge.

• Increase in the number of households, currently 8.8 million,

heading to 9.8 million in 2021.

• 70 per cent of homes are over 20 years old. Relative high

levels of employment, at around 94.3 per cent.

• Increase in people employed (up 1.8 per cent over last year),

having jumped past the 12 million barrier.

• Increase in household incomes.

• Increase in housing finance (up 4.8 per cent) for owner

occupied dwellings. Although we have achieved record levels

of household debt/borrowings (higher house prices), the value

of the asset has resulted in Australians having the highest

personal net wealth per capita in the world.

KEY MESSAGE: ADAPT

Consumers’ lives have been pushed out by 15 years. Thirty

years ago, we left school, formed relationships, got married, had

families, built a career and retired, all between the ages of 25 to

65. Today, time to do all of that is 35 to 75. Australia’s economic

dividend or working life of our people is creeping up with financial

commitments increasing and the amount of working time to pay

them off diminishing. The proportion of new homes owned/being

purchased by 25 to 34 year olds was 56 per cent in 1982 and is

now at a staggering 34 per cent. Affordability, household formation,

life preferences, limited ability to form relationships and social/

electronic media are impacting the longer term role of the home

improvement and lifestyle market as we know it today.

By 2036, home renters will be a higher proportion of households

than home owners. This will mean a greater incidence of

decoration, maintenance, household services and lower

proportion of additions and renovations. The proportion of new

homes will diminish as retirement villages and nursing homes

expand to cater for an ageing population.

During the early to mid-2000s, Australian homes overtook those

in the USA as the world’s largest (i.e. the McMansion). New homes

will continue to shrink in size, aided by 55 per cent of households

occupied by singles and couples without children by 2031, lower

cost of land (smaller lots), building and of course, maintenance. The

investment/rental market will also cater for changing lifestyles.

SAFETY AND SECURITY: CONCERNS FROM A LOCAL AND

GLOBAL PERSPECTIVE

Health:

Government intervention is now required to address

concerns around the well-being of children with a sugar tax

imminent. In adults, growing levels of stress and anxiety around

housing, employment and relationships are seeing increases in

mental health issues. This environment also impacts children and

the broader family and community.

Convenience:

Time poor, dual-income families are seeing higher

levels of debt as demands on individuals and families increase

in an economy that has stalled. Time to shop, do the garden,

communicate and look after children is driving the need for

convenience and out-sourcing of day to day activities.

- A REPORT BY HOME IMPROVEMENT INDUSTRY EXPERT, GEOFF DART