Timber market stands tall at last

After years of regulatory uncertainty and governmental prevarication, Australia’s timber industry is set to enjoy some rational, strategic growth. John Power reports.

Emotion and political ‘fence sitting’ have plagued Australia’s timber industry over the last decade, but the scene is set for some logical and planned business growth over the next several years.

When the Liberal Government had an unexpected win in May’s Federal election, the result confirmed a number of key existing Liberal Party commitments to the timber industry, including strategies relating to a National Forest Industries Plan.

The most notable component of the plan is the establishment of at least nine Regional Forestry Hubs, starting with the rollout of four ‘pilot’ hubs, with the overall aim of producing a billion trees over the next ten years in Australia.

The four pilot hubs are in northwestern Tasmania, southwestern WA, the Green Triangle region of southeastern South Australia (extending through to southwestern Victoria), and northeastern NSW.

Subsequent hubs are planned for Gippsland in Victoria, the South West Slopes of NSW, Central West NSW, southeastern Queensland, as well as northern Queensland.

These hubs, the government has announced, will help the timber industry create at least 400,000 hectares of new plantations nationwide in a targeted fashion, guaranteeing that the right trees are planted in the right places to meet future demand.

Unlike previous ad hoc policies, the new hubs will also facilitate greater involvement from farmers, whose long-term commitment to timber production is pivotal to meeting overall targets.

In February, Member for Wannon, Dan Tehan, confirmed seed funding for the inaugural hub in southwestern Victoria. Allocations of at least $1 million for each of the remaining hubs have also been declared.

If all goes to plan, the hubs should help redress a decline in locally produced timbers, including softwoods, and help the industry recover from a period of recent volatility, characterised by erratic pricing and strong competition amongst wholesalers.

In addition, the Federal Government has committed to the creation of a Plantation Development Concessional Loans Scheme ($500 million) to help investors meet the capital costs of land purchases and plantation establishments.

This capital investment alone is expected to result in up to 150,000 hectares of new plantations.

Demand for renovations

Of course, a more reliable local timber supply is only half the secret to a more stable industry; a healthy market is also required to complete the deal. 

So, what can hardware retailers expect to happen over the next 12 months?

It is evident that there has been a sharp decline in new housing starts over the past year. In the year to March 2019, according to the Australian Bureau of Statistics, new private sector housing construction fell nationally by 9.3 per cent, while the total number of dwelling units commenced fell by 21.8 per cent.

The good news is that falls appear to have plateaued, spurring sales of existing homes and hopefully encouraging a return to more reliable construction activity. Nevertheless, most pundits tip real estate prices to stabilise rather than grow.

This phenomenon usually leads to a surge in renovations (for a variety of reasons), and there is every indication that this is exactly what is happening in the market now. Late last year, Australia’s home renovation sector enjoyed its busiest quarter (June-September 2018) in 14 years, leaving some retailers caught out by unanticipated spikes in demand.

Most activity came from conspicuous structural work and highly visible cosmetic additions designed to impress buyers, including upgrades to decking, patios and terraces. Similar works involved improvements to fencing, sheds, pergolas, landscaped garden beds, as well as driveways and paths.

While a fall in new builds inevitably leads to a drop in demand for structural pine, the above kinds of renovations often spark renewed interest in decking timbers and similar hardwood products.

A trend in favour of greater renovation activity makes perfect sense: when house values were rising at a rate of knots, owners had little incentive to modernise or upgrade properties – homes were selling like hot cakes in any condition. However, now that prices have stagnated, the only way to improve values is to actually improve properties. Hence the likelihood that owners will once again undertake early-2000s-style improvements, in the range of $10,000–20,000, in an effort to maximise capital gains.

Dressed to impress

It is important to note that timber-based improvements are bound to be concentrated in projects that have a ‘wow factor’. Do not forget that although property prices have stabilised, wages remain mostly fixed and lending practices remain tight. This means disposable income is hard to come by, as a rule, and homeowners will spend money on renovations only if the expenditure is likely to have an immediate and obvious impact on appearance or utility.

Retailers would do well to market products and finishes that embellish gardens and primary entertainment hubs of the home. Retail display space is always at a premium, but consider showcasing some kind of decking or balustrading display that might embolden a homeowner to tackle a project. Arrays of differently stained timbers are always worth showing, particularly as we make the transition to spring.

Also, allow for both trade and DIY interest in renovations – high-profile additions or upgrades designed strategically to enhance property values do not permit error, so there is every reason to expect professionals to be engaged for this kind of work despite the increased cost. 

Finally, now is a great time for the timber industry to capitalise on the flammable aluminium cladding debacle. Homeowners are warier than ever of metallic and synthetic/composite material cladding panels, so classical timber cladding is well placed to fill the void. High-visibility timber façade products, as well as interior cladding solutions, represent an opportunity for retailers to help homeowners add style, class and safety to their property. Timber is seldom marketed as a ‘fire-safe’ product category; however, compared to the polyethylene (PE) interlayers of cheap aluminium composite cladding, it certainly rates as a much safer building material.