2017 Hardware Suppliers & Industry Directory
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:
Foreign investors continue to see Australia as a safe
haven, while negative gearing contributes to increased house prices.
Low rates have stimulated increase in debt and
household debt is now the highest on record.
Local manufacturing is succumbing to global
labour and pricing levers, with most Australian retailers
increasing sourcing of goods from overseas.
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
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.
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