Alts & Adds add up to a big spend – including for furnishings

The Australian love affair with residential property takes many forms. The latest data shows that part of that is a commitment to continually improving property, to a point where it meets the latest expectations. This has driven expenditure on Alterations & Additions to an all time high of AUD8.357 billion for the year-ended March 2017, a rise of 2.6% on the prior year. Importantly, this growth is faster than the inflation rate of 2.1% recorded by the Consumer Price Index.

The chart below shows the last decade of expenditure on Alterations & Additions by Australians. While it peaks and troughs, it is relevant to note that in general, this expenditure lags behind housing approvals. It is not entirely clear, but it is likely that this effect has an element of the ‘herd’ in it, but what it clearly includes is that rising house values provide the financial room for a little more expenditure on the extra rooms, the kitchen and bathroom renos and other things that make a house a little more of a home.


To go straight to the dashboard and take a closer look at the data, click here.

The suspicion – unconfirmed – is that a large portion of the rise in alterations and additions expenditure is funded by equity in houses by those who have been in their dwellings for some time. The other portion of this story is that as Owner Occupiers trade up and buy new houses, they are renovating and making the adjustments they require almost as soon as they own the property. 

All that accounts for the lag, as well as the rise.

Other data links into the Alterations & Additions data, at least in part.

Here supplied over the last half decade, the chart below shows retail expenditure, for selected industries, including the still strong sales of Furniture, Floor Coverings and Homewares. It shows that while retail sales in total are quite stable – growing 3.2% for the year-ended April, sales for what goes in a house – Furniture, Floor Coverings and Homewares – are up 4.3% over the same period. 

This compares with the 0.5% year-ended April decline in sales of what goes outside the house (mainly) – Hardware, Building and Garden Supplies. As the chart shows, this expenditure has turned around quite rapidly and appears now to be in negative growth territory.


To go straight to the dashboard and take a closer look at the data, click here.

So, Australians have spent up big on Alterations & Additions and, along with those in new dwellings, are still spending large on the interiors of their houses, but less on the outdoor elements. That makes sense as the housing boom ends and new dwelling completions come off their peaks.

But this comparison is a little misleading. The really important data is that growth in retail sales expenditure, compared with two or three years ago, has slowed quite sharply, including for these housing related expenditure items. More money spent on houses, housing and renovations means less money spent on the other elements of housing, it seems.

What is a concern going forward is the extent to which this data is displaying households being cautious as they consider just how much debt they have entered into to drive their housing purchases. And that means interest rate policy is at the centre of concern about the future of Australia’s economy.