The DIY market will grow by 15% to a total of $25.4 billion by 2017, according to the latest figures published by forecaster IBISWorld, with home improvement stores including Bunnings and Woolworth’s forthcoming Master’s chain to be the real winners.
But the increase rate of spending in the DIY market is also symptomatic of a subdued housing market, as owners feel they are better off making renovations and repairs to their homes to increase value rather than wait for equity to build up.
The new IBISWorld figures show the DIY market is expected to grow 2% during 2011-12 to revenue of $22 billion, with $11.5 billion of that concentrated in hardware retailing.
Senior analyst Paul Lyons says the rise of popular renovation shows such as The Renovators and The Block are a symptom of the cyclical market swinging back towards renovation and DIY instead of purchasing outright.
“We’ve seen a weaker property market, and changing prices, that are making people realise that staying home and investing in their own home is a safer bet than moving house. We’re also seeing very cautious consumers investing in the value of their homes rather than retail.”
“They’re investing in plant and hardware in order to improve the value of their biggest asset.”
The DIY market is set to grow at 5% each year to 2017, with DIY and home renovation to take 52% of all spending, followed by professional help at 34% and garden supplies at 11%. Plant nurseries will only take 3% of the growth.
The hardware industry alone will grow 23% over the next five years to reach $14.2 billion 2016-17, IBISWorld says, with Lyons saying that both Bunnings and Master’s are to see the biggest benefit – although Master’s will record the largest growth.
While IBISWorld says Bunning’s is set to benefit from 26 new stores, it also says Master’s will open first in Melbourne’s Western suburbs – the fastest growing region in Australia.
“Woolworths also plans to open 30 big box stores per year over the next four years across the nation, and the company has committed to 150 development sites by the end of 2015.”
Lyons says while Bunnings will maintain its market share at 20%, Master’s will soon grow from the other 80%.
“As Master’s enters the industry it’s going to be clear that competition will increase, and in the short-term prices will fall and that will be good for consumers.”
“But we may see independent operators fall away. And as the years continue, price falls may not occur as competition dwindles. We could say in the next 10 to 15 years prices could increase slowly, although they would anyway.”
Other sectors will benefit – plumbers and electricians are set to see a rise in demand, although IBISWorld says tradespeople including painters and landscapers may see lower amounts of work as renovates try projects themselves. However, the firm warns this cycle too will come to an end.
Property experts are also expecting prices start increasing after the next few years, when prices remain subdued.
“Subdued growth in housing prices over the next five years is likely to continue driving DIY demand if consumers are unable to maximise capital appreciation, leading many to save and add value to their homes rather than sell.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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