It’s no rumour that renos are rising – we know for a fact that much more of the ‘new’ housing dollar is being spent on renovations.
Some estimate that just over half of the money spent on residential construction is now spent renovating rather than on new builds.
Others estimate that the Australian renovation market has more than doubled in size ($ spent) since the early 2000s.
I think there is much more at play here than just economics – or those popular nightly TV shows.
It’s true that the increase in taxes & charges on new property (GST; infrastructure charges; stamp duties etc.) has had a negative impact on new housing demand. This goes some way to explain why new house building is at record lows (in per capita terms), but it doesn’t fully explain the rapid rise in renovations.
Here are a few thoughts that might shed some light on what’s going on:
1. Increasingly, we feel we have less control over our lives.
Post 9/11. The threat of terrorism. Lack of political leadership. The internet. Media sensationalism. Our general lack of fortitude – we scare so easily these days. No nation building projects. This list could go on & on.
And so undertaking a renovation is one way of controlling our environment.
We aren’t confident enough (yet?) to make a ‘big’ move and buy something new.
2. What defines a home isn’t the property itself, but more often than not, it is defined by the spaces around it.
Housing (home) is bound up with a vivid sense of place.
This seems lost on many of today’s planners, even architects & especially developers.
If you listen to buyers (including investors), they will describe what surrounds the property & how the building itself interacts with this space, rather than the dwelling itself.
[sam id=31 codes=’true’]It’s not just about what the project looks like but how it fits into its immediate surrounds.
It is much more than just a property’s ‘location’ or in which suburb it sits.
There is pride at stake. Too few new residential developments evoke a sense of pride.
An owner must be able to say, with a degree of self-importance, that I live here (or own one of these).
I cannot help but think that too many new developments look pretty crappy and also lack this vital connection between the property itself & the surrounding space.
Too many lack a sense of place.
3. Taking this line of thought further, we all seem to want our ‘own place’.
This want for ‘my place’ is one reason why renovations are replacing new development.
Renovations can allow us to make space more suited to ‘me’.
Whilst renovating often means adding space – a home within a home so to speak – renovations also aim to improve space & this is the point when it comes to new development.
Potential buyers tell us that it is the carbon copy nature of new development (rather than the amount of it); their lack of input in the final product & the strict rules of its use that stop them from buying something new.
It seems to me that new development these days excludes ‘non-profitable’ components – things like upgraded foyers, communal meeting spaces etc. The best medium-density housing developments, for example, incorporate plenty of built-in space where incidental contacts occur naturally.
Why can’t off-plan buyers – who financially qualify – make changes to certain things like kitchen & bathroom layouts? Many more would buy if they could do so.
Why can’t new projects design in some flexibility? Internal walls that move. Multi-functional spaces.
We want bespoke. Even if is just a tiny bit.
And whilst a cost burden, many accept body corporate fees, but the rules associated with living under such a system seem antiquated to say the least.
Yes there are plenty of economic reasons why what I have outlined is difficult to implement. But these are some of the reasons why new dwelling sales remain low & renovation activity is on the rise.
PS The want for ‘my space’ helps explain why, in many Western societies, houses are expanding while households are generally shrinking. Children used to share bedrooms a generation ago. My grandparents never said ‘I need some space’. But my kids, our parents & my wife & I do.
This Matusik Missive, like all of them, is commentary & not advice. Readers should seek their own professional advice on the subject being discussed.
Michael is the director of independent property advisory Matusik Property Insights and writes the Matusik Missive which is free, however, reprinting, republication or distribution of any portion of this material, or inclusion on any website, is strictly prohibited without the written permission of Matusik Property Insights and may incur a charge.
If you’re serious about property investment please join me and a group of property and tax experts at my upcoming Property Market and Economic Updates that I’ll be conducting in 4 states in August and September 2013
I will be presenting a heap of BRAND NEW content I haven’t discussed in public before. I guarantee there will be several things I reveal that you are not doing and you should be!
Click here now to get more details and reserve your seat.
If you want to cut through all of the media hype, and all the contradictory predictions, and finally learn the truth (good and bad) about what is going to happen to the Australian property markets, this seminar is exactly for you… Click here now to get more details and reserve your seat.