The value of the Australian home improvements market reached $24.2bn during 2006, according to a leading industry analyst and economic forecaster, BIS Shrapnel.
During 2006, 59% of Australian households (4.4m) undertook some kind of home improvement project, according to BIS Shrapnel’s Home Improvements Market in Australia, 2006 report.
In total, the forecaster estimates 5.3m separate home improvements projects were undertaken last year.
This is a drop-back from the 2004/05 peak of 5.8m projects though is on par with the activity reported in BIS Shrapnel’s previous study conducted in 2003, according to senior project manager and study author, Ross Trewartha.
“While the number of home improvements projects did decrease, we estimate the value of the market grew nine % between 2003 and 2006 due to rising costs,” said Trewartha.
“The sector has shown continued growth over the past decade as it is not as susceptible as new dwelling construction to external market factors.”
“The value of the home improvements market in 2006 was equivalent to 75 % of the value of new dwelling commencements over the same period.”
BIS Shrapnel estimates the size of the market is almost five times larger than the Australian Bureau of Statistics (ABS) figure for approvals of alterations and additions, as the ABS only collects data on projects costing more than $10,000 that require council approval.
Trewartha explains that the majority of home improvement projects do not require council approval and with an average cost per project of just $4,548 in 2006, fall well short of the ABS cut-off.
BIS Shrapnel estimates there were 168,400 house addition projects undertaken in 2006, with ground or upper floor additions accounting for $6.49bn (27% of the total home improvements market) while internal renovations which do not require council approval (i.e. bathrooms, kitchens and laundries) totalled $7.11bn or 29% of the total market value.
House additions are the most expensive home improvement activity and upper floor additions cost on average $58,835, while ground floor additions cost approximately $32,681, according to Trewartha. Swimming pools are the only other project with an average cost of over $10,000, averaging $12,062.
The Home Improvements Market in Australia, 2006 report states New South Wales has the highest average project cost at $5,495, followed by Victoria at $4,313.
“In today’s climate of increasing house prices and debates about the best potential price growth areas, capital gains associated with major home improvements projects is not a significant driver of activity,” said Trewartha.
“When asked what the single most important reason was for undertaking a ground or upper floor addition, over one-third of survey respondents said it was due to the size of their family, with a further 22 % wanting to provide more space for entertaining and general living. Only three % of households said the main reason for their house addition was for a potential capital gain.”