Renovating
Architecture
What's the Outlook for Renovations in 2023? Experts Weigh In
There's light at the end of the tunnel for renovators and builders this year, but patience and flexibility are key
Material delays, soaring product costs and a dearth of skilled trades – the past few years have seen our building industry beset with challenges. Add interest rate rises to the mix and anyone planning a new build or renovation has every right to be concerned. Fortunately for renovators, it’s not all doom and gloom in 2023 and beyond, with trade costs cooling and materials becoming easier to access, according to the three experts we spoke to.
And, as the 2023 AU Houzz State of the Industry report found, there is increasing optimism across the industry. More than half of the residential companies surveyed expect this will be a good or very good year (53%), and 36% express a neutral outlook. Interior designers and decorators are the most optimistic, with 81% anticipating a good or very good year, followed by home builders (67%).
And, as the 2023 AU Houzz State of the Industry report found, there is increasing optimism across the industry. More than half of the residential companies surveyed expect this will be a good or very good year (53%), and 36% express a neutral outlook. Interior designers and decorators are the most optimistic, with 81% anticipating a good or very good year, followed by home builders (67%).
Image: HIA.
“Two major factors are still impacting home renovations in 2023: materials and labour,” says Tom Devitt, senior economist at Housing Industry Association (HIA). “During the pandemic, these constraints resulted in build times for detached housing increasing from a little more than eight months to more than a year.
“There are likely to be ongoing material supply issues, but not to the magnitude experienced early in the pandemic,” he says.
“Two major factors are still impacting home renovations in 2023: materials and labour,” says Tom Devitt, senior economist at Housing Industry Association (HIA). “During the pandemic, these constraints resulted in build times for detached housing increasing from a little more than eight months to more than a year.
“There are likely to be ongoing material supply issues, but not to the magnitude experienced early in the pandemic,” he says.
“While constraints are still a concern, the good news is they are moderating,” says Devitt. “Materials are easier to come by, price increases are slowing and transportation of materials between states is no longer the issue it was during the peak of Covid-19. Oil prices are down too.
“Labour constraints are now the dominant issue for the industry, which will impact the completion times of renovation projects,” he says.
Keen to compare cost estimates or start planning a future renovation? Find builders near you on Houzz and browse their previous projects
“Labour constraints are now the dominant issue for the industry, which will impact the completion times of renovation projects,” he says.
Keen to compare cost estimates or start planning a future renovation? Find builders near you on Houzz and browse their previous projects
Will it be cheaper to renovate or build in 2023?
“I think it is going to be hard for home renovators and builders in the low- to mid-market sectors for two reasons: interest rate rises and the fact that the cost to build has not yet fully plateaued,” says Neil Turrell, director of Turrell Building. “The cost of building is now 42 percent higher overall than two years ago.”
Turrell predicts that builders and homeowners in the mid- to upper-budget bracket will be less impacted. “They are not as affected by interest rate increases and often don’t have such a tight budget to work with,” he says.
“I think it is going to be hard for home renovators and builders in the low- to mid-market sectors for two reasons: interest rate rises and the fact that the cost to build has not yet fully plateaued,” says Neil Turrell, director of Turrell Building. “The cost of building is now 42 percent higher overall than two years ago.”
Turrell predicts that builders and homeowners in the mid- to upper-budget bracket will be less impacted. “They are not as affected by interest rate increases and often don’t have such a tight budget to work with,” he says.
If you don’t need to start your project straight away, sitting tight and waiting for industry pressures to ease might be the smart option, says Naughtin. “2023 is the year to plan your project. Get all your plans done and submitted for approvals and get ready for a reduction in interest rates and [better] availability of trades,” she says.
Image: HIA.
What are the main pressures facing building professionals in 2023?
The 2022 AU Houzz State of the Industry report revealed that price volatility of products and materials was the top business challenge for home builders (32 percent) in 2021. And it’s still a challenge today, says Devitt: “Materials and labour challenges are still the main pressures facing building professionals,” he says. “Home-building materials went up 30 percent over the pandemic and are likely to remain elevated.
“The biggest materials cost factors have been in timber products (up 40 percent) and steel products (up 54 percent).
“There is also still an acute shortage of skilled tradespeople, especially in bricklaying, roofing, carpentry and ceramic tiling. The return of overseas workers and shrinking of work pipelines later this year will ease these pressures – whether it will be enough to actually reduce the price of tradespeople is another matter,” he says.
What are the main pressures facing building professionals in 2023?
The 2022 AU Houzz State of the Industry report revealed that price volatility of products and materials was the top business challenge for home builders (32 percent) in 2021. And it’s still a challenge today, says Devitt: “Materials and labour challenges are still the main pressures facing building professionals,” he says. “Home-building materials went up 30 percent over the pandemic and are likely to remain elevated.
“The biggest materials cost factors have been in timber products (up 40 percent) and steel products (up 54 percent).
“There is also still an acute shortage of skilled tradespeople, especially in bricklaying, roofing, carpentry and ceramic tiling. The return of overseas workers and shrinking of work pipelines later this year will ease these pressures – whether it will be enough to actually reduce the price of tradespeople is another matter,” he says.
As an architect, Naughtin concurs. “Sourcing quality, reliable contractors in a work-saturated market [is an ongoing challenge].
“Also, value-managing projects to provide the best outcome for clients while determining unpredictable costs and the limitations that arise from these [is a challenge],” she says.
“Also, value-managing projects to provide the best outcome for clients while determining unpredictable costs and the limitations that arise from these [is a challenge],” she says.
“The main pressure on builders this year is clawing back the losses they have incurred over the past two years due to fixed contracts and having to wear the increases that surpassed any profit margin they allowed for within the project tender,” says Turrell.
“Another [challenge for builders] will be getting clients comfortable with the cost of building today and having faith they will still be around in a year’s time, given the instability of the industry,” he says.
“Another [challenge for builders] will be getting clients comfortable with the cost of building today and having faith they will still be around in a year’s time, given the instability of the industry,” he says.
Attracting our next generation of carpenters, electricians and roofers into what is perceived to be a volatile industry will have an impact too, says Turrell.
On the upside, he believes trade costs are likely to come down; “I do think there will be a shift for builders in acquiring trades at a better quote or hourly rate as the backlog of work eases in 2023. In general, trade costs have gone up about 35 percent since 2021, but I feel they will come down around 10 to 15 percent in the coming months.”
On the upside, he believes trade costs are likely to come down; “I do think there will be a shift for builders in acquiring trades at a better quote or hourly rate as the backlog of work eases in 2023. In general, trade costs have gone up about 35 percent since 2021, but I feel they will come down around 10 to 15 percent in the coming months.”
What’s the impact on renovators and those building a home?
“Everyone wants value for money and many clients are shifting their mindset to ensure they are not over-capitalising,” says Naughtin. “People are sourcing different materials and selections as cost-saving alternatives. However, even cheaper alternatives have adjusted their price to accommodate for inflation.
“Delivery lead times have extended from the typical six-to-eight-week period to eight-to-10 weeks [and often longer], making it a priority to source, secure and order items early,” she says.
“Everyone wants value for money and many clients are shifting their mindset to ensure they are not over-capitalising,” says Naughtin. “People are sourcing different materials and selections as cost-saving alternatives. However, even cheaper alternatives have adjusted their price to accommodate for inflation.
“Delivery lead times have extended from the typical six-to-eight-week period to eight-to-10 weeks [and often longer], making it a priority to source, secure and order items early,” she says.
How have building contracts changed in 2023?
Another thing you can expect to see from your builder are tighter contracts that cover product or material price increases, says Turrell. “For the first time, my contracts [now state that] we will wear any increase on a particular item up to seven percent and then we go halves with our clients for any percentage above that,” he says.
Another thing you can expect to see from your builder are tighter contracts that cover product or material price increases, says Turrell. “For the first time, my contracts [now state that] we will wear any increase on a particular item up to seven percent and then we go halves with our clients for any percentage above that,” he says.
What’s the best way to manage product and material delays when renovating or building a home?
Naughtin says:
Naughtin says:
- Be honest about your priorities and budget in discussions with your designer.
- Remove any unnecessary items or those that can be added later.
- Be aware of product lead times and, if you have storage available, pre-order items with long lead times.
- Be open to alternatives: remember that a designer will always have two or three alternatives for every material selection that won’t compromise your design.
- Support locally sourced and manufactured materials and items. This can reduce delays and supply issues from overseas companies, while supporting Australian businesses.
- Ask whether it is possible to have a timeline with a critical path identified to ensure the process stays on track.
- Ask your architect what contractual arrangements can be made to keep your builder on track.
Devitt says:
- Be patient and work alongside your builder in partnership. Remember, product and material delays impact everyone and they are just as frustrating for your builder.
- While being open to alternatives offered by your builder is wise, if you have your heart set on a certain product that will be an aesthetic or functional feature within your renovation, be prepared to wait.
- Regular and courteous communications during this time will be a key contributor to the successful completion of your new home or renovation.
Your turn
Have you started building or renovating this year? Share your experience in the Comments below. And don’t forget to save these images, like this story and join the conversation.
More
For more expert building and renovating insights, don’t miss Building or Renovating? How to Check the Eco Cred of a Pro
Have you started building or renovating this year? Share your experience in the Comments below. And don’t forget to save these images, like this story and join the conversation.
More
For more expert building and renovating insights, don’t miss Building or Renovating? How to Check the Eco Cred of a Pro
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Yes and no, say the experts. “There has been a shift from 2022 with more confidence around product supply. However, the demand is extremely high, so prices will continue to escalate,” says Rebecca Naughtin, architect and director at Rebecca Naughtin Architect.