Homeowners and renters suffer as the market for homes and rental properties faces a pricing crisis. This is reflected not only in the price of housing itself but also in the market for home renovation, improvement, and building services, affecting countless homeowners, renters, and builders.
Statistics from Rated People, an online marketplace connecting homeowners with tradespeople, indicate some important trends. They’ve indicated that 35% of homeowners are looking to improve their homes as opposed to 52% in the past year. This data point has been theorised to be due to many factors: supply and labour costs, lack of disposable income, or even an overall trend towards lower home ownership over the past decade.
All these reasons have contributed to a deceleration in the market whose ripple effect is being seen by adjacent industries and prominent companies in the UK. In turn, the response has been to raise prices and put the burden on consumers but there is a chance this only dissuades and prices out potential buyers.
As a consequence, builders have lost business and had to adjust. The increasing cost of materials and rising operational costs have meant 86 per cent of tradespeople need to increase their prices for homeowners this year. This is a trend that has also followed from prior periods, with the price of bathroom renovations rising 40% since 2020.
Several categories of workers are raising their rates, from gas and heating experts to plasterers. Something as standard as the average window replacement cost has also suffered an uptick among homeowners, being overall more costly. Many consumers appear to be holding off on both crucial and cosmetic renovations in response.
With 71% of tradespeople surveyed slated to see a shortage of work during the year due to the rising cost of living, the industry is looking to be in dire straits from a labour perspective as well. Despite growing interest in careers in trades, as indicated by search trends and sign-ups to vocational schools, the effective earning potential within the industry is declining.
Corporate Aftershocks Persist
Last year, multiple DIY and renovation-adjacent companies noted sharp declines in their revenue. These names included Marshall’s, Wickes, and Kingfisher, each of whom had seen a dip in their business. From patio development to DIY and renovation products, there was a softening of the market overall.
The cost of living crisis continues to loom over consumers so it’s only natural they spend their money on essentials. Another aspect that continues to plague the major retailers is the adoption of digital retail, which has only continued. These factors have only exacerbated the uncertainties already present in the market.
In contrast, the home improvement loan sector has been doing better, going from £11 million to £14 million over the course of this year. Homeowners are now having to take out loans to further enhance their living spaces.
Such loans have largely gone towards loft conversions, patio doors, and walk-in wardrobes. The market also indicates that the most prominent uses are on the affordable side with cost-effective purchases the norm as opposed to luxury installations.
Mortgage costs have also skyrocketed, leaving fewer homeowners within the market. This has slowed the parallel home renovation industry and seen the shares of UK housebuilders tumble downwards. However, this has also been a consequence of higher interest rates in the past months. As to whether the interest rate has peaked, there is much debate as to whether there will be a new hiking cycle.
Future Outlook on Home Improvement
While it may seem that it’s all doom and gloom, there is still reason to believe that things will turn around. Demand for renovations is still high even if prices have not yet met that demand. The market has shifted more towards cost-effective improvements to their houses.
Another major area of opportunity for the market has been the rise in demand for eco-friendly measures such as solar panels and better heating solutions. As the UK government employs grants aimed at more environmentally friendly measures, homeowners can invest in solar energy or renewables to steer clear of the energy prices.
With government assistance, homeowners can save thousands of pounds on efficient boilers and heat pumps or even cut on their energy costs using solar panels. Similarly, these incentives could, in coming years, increase disposable income due to the savings that they allow.
Interest rates are stable for the time being which may be good news for homeowners. This could be a welcome sign for their wallets if they have been paying off mortgages. The rate has been climbing since 2021 but there is much discussion about whether this is the peak.
Cost-saving measures such as these may be able to deter future costs on an individual level and the newly introduced price caps (as of October this year) may also put some more disposable income in the hands of homeowners. This could potentially boost industry prospects after some time. For now, only time will tell.