Singing a new tune on housing

Australians are singing a new tune on housing. The theme song of the 2000s, “money for nothing”, landed first-home buyers in Dire Straits. With home affordability severely stretched, it’s time for a new rhyme: “If you can’t be with the one you love, honey, love the one you’re with.”

I hesitate, always, to draw deep meaning from reality TV shows, but it’s hard to miss the boom in renovation shows. Prime time serves up a plethora of D-I-Y inspiration: The Block, The Renovators, Top Design, to name a few. A decade ago, TV property shows were all about employing designers to spend $30,000 on renovations and then sitting back and watching the home sellers’ ecstatic faces as their properties sold at auction for $100,000 above initial valuations. As a get-rich-quick scheme, it was hard to beat.

But this present renovation boom is quite different. There could be no better demonstration than the failure of three out of four of the houses from The Block to sell at the finale auction last weekend. Two of the houses sold this week, at $1 million and $922,000. Adding Polly and Waz’s prize-winning-house price of $855,000, the three houses have so far only recouped $2.8 million of the $3.6 million Channel Nine reportedly paid for the four properties in February.

On top of that, it also paid between half a million and a million dollars to convert the formerly single-storey residences into two storeys. Contestants then spent $100,000 each on renovations, bringing the total cost of each home to upwards of $1.2 million each.

Yes, the days of the get-rich-quick renovation are over. Today’s renovators are driven by different motivations. Industry analysts at IBISWorld are tipping healthy annual growth in renovations spending from $22.2 billion this year to $25.5 billion over five years.

High home prices are persuading more home owners to stay put, spending the $30,000 they might pay in stamp duty on renovating instead.

Australians are reassessing what it is they want from their homes. In the past two or three decades, the average new home size increased 40 per cent. At the same time, the number of people per dwelling fell. The rise of single-person households, as we marry later in life – if at all – coincided with higher divorce rates and women having fewer children.

But the days of rattling around in McMansions are nearing an end, according to analysis by the chief economist at CommSec, Craig James, released this week. Australians continue to build the biggest homes in the world but there are signs this has peaked, reflecting the “new conservatism” of Aussie consumers. There are also early signs the century-long trend towards fewer people per home is reversing.

Higher house prices are the result of limited supply and increasing demand. Governments have tried unsuccessfully to increase housing supply, but it emerges that demand was the more flexible of the two.

Younger Australians are not only living at home longer to complete their studies and save a deposit – they also have a different attitude. James says: “Gen Y place less importance in home ownership than past generations, preferring to maximise life experiences.”

Meanwhile, ageing baby boomers are increasingly looking to downsize to smaller apartments close to public transport and amenities.

So huddle up everyone, as we repaint the lounge room and heed the message in Merle Travis’s 1947 folk hit: “You load sixteen tons, and what do you get? Another day older and deeper in debt.”

THE IRVINE INDEX

214m² Average new floor size of new Australian homes (including apartments) built in the nine months ended March this year.

40%
Increase in Australian new home size since 1985, when it was 150m².

244m²
Average floor area of new free-standing houses in Australia, the biggest in the world. The average new apartment is 134m².

270m²
Average floor area of new free-standing houses in NSW, the biggest in Australia.

195m²
Average floor area of new homes in the United States.

$22.2b
What Australians are expected to spend on home renovations this financial year.

2.4
Average number of people per Australian home, down from 4.5 in 1911.

$2.8m
Combined amount that three out of the four houses have sold for. (Polly & Waz $855,000; Josh & Jenna $1 million; Rod & Tania $922,000).

$3.6m
What Channel Nine paid in February to buy the four homes in Richmond, Melbourne, pictured, that featured on The Block.

Sources: CommSec research note; Australian Bureau of Statistics; realestatesource.com.au

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One Response to Singing a new tune on housing

  1. Ross says:

    Where does this leave someone like me who wants to buy a home, but has been priced out of the market by the decade long housing boom?

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