Rates may hit renovations From: By Nicki Bourlioufas June 05, 2006 RENOVATION activity bounced in the March 2006 quarter - but the outlook for activity is weak given higher interest rates.
The Housing Industry Association's (HIA) quarterly Renovations Monitor found major renovation activity (jobs carried out by licensed builders and contractors) increased by 13 per cent in the March 2006 quarter to $782 million. HIA's Chief Economist, Mr Harley Dale, said the early 2006 result was encouraging ahead of a likely rate-rise induced softening mid-year.
"Relatively stable house prices and continuing strong labour markets are delivering reasonably healthy levels of expenditure on major renovations, although activity continues to be down on the peak levels of 2002 and 2003," Mr Dale said.
"The interest rate rise in May and sustained higher fuel costs will take some of the shine off renovations, as well as the new home market, in the June quarter, and overall spending on renovations will be lower this year than last," he said.
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Major renovation expenditure increased almost everywhere in the March quarter, with the strongest rises occurring in Western Australia, South Australia, and Queensland. Over the three months to March major renovations expenditure increased by 23 per cent in Western Australia and rose by 16.3 per cent in South Australia, 15 per cent in Queensland, 13 per cent in Victoria, 12.9 per cent in New South Wales, 10.7 per cent in the Australian Capital Territory, and 7.4 per cent in the Hunter region.
Major renovation expenditure fell by 20.3 per cent in Tasmania. A survey of NEWS.com.au readers found in February that Australians do not expect the housing market to recover any time soon. The poll found 33 per cent of the 2232 respondents expected house prices to fall over the next quarter, while 37 per cent expected no change. Just 30 per cent of people expected a rise in house prices. The NEWS.com.au survey also found Australians are sensitive to rise in interest rates - and a rise of 1 percentage point could force many to sell their homes.
If interest rates rose by 1 per cent, over one-quarter of respondents with investment properties, or 27 per cent, said they would be forced to sell them.
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