Renovation sector feels pain of property slump, says BIS

The state of Australia's home renovation sector has been described as "alarming" by analyst BIS Shrapnel.

The company's managing director, Robert Mellor, said an unprecedented plunge in approval figures for alterations and additions was seriously hurting builders and suppliers.

The value of approvals plummeted from $6.86 billion in financial year 2009-10, at the height of the last property boom, to $5.91 billion last year, according to Bureau of Statistics figures.

"Even in recessionary years like 1982-83 and 1990-91 I've never seen a 14 per cent decline over a three-year period. It has never, ever happened before," Mr Mellor said.

"I look around and talk to companies who are providing materials into that sector and the story is not good."

The slump's cause was withdrawal of stimulus measures such as the first home buyers grant and slowing economic conditions, according to BIS Shrapnel's Building Industry Prospects report. Hardest hit were the Northern Territory (down 72.8 per cent), Western Australia (down 21.3 per cent), Queensland (down 21.1 per cent) and New South Wales (down 15.5 per cent), all of which had three consecutive years of decline.

Despite a fall in 2012-13, Victoria remained nominally positive in the period with a rise of 0.4 per cent.

But the analyst group expects the alterations and additions sector to turn the corner this financial year, with the value of approvals rising 4 per cent nationally. The return to growth is expected on the back of rising house prices and renewed interest from upgraders, downsizers and investors.

"We anticipate this presents upside potential to the renovation market in the future, as upgraders/downsizers and investors generally have more equity built up which allows more scope to perform renovations," the report said.

Victoria is the only state in which a fall in approvals (1 per cent) is expected in 2013-14 as the market continues to grapple with softer house prices and the lingering effects of the last property boom.

cvedelago@theage.com.au