All eyes will be on the Federal Reserve Board’s decision on Tuesday 18th February on the direction of interest rates in Australia.
With inflation figures looking better, the chances of interest rates going down in 2025 have substantially increased.
Whether this happens on 18th February or soon after, we will no doubt get some guidance in the comments from the Reserve Bank Governor, Michelle Bullock, and the board’s post-meeting statement.
Lower Interest Rate Predictions
Back in December, there was cautious but undoubted encouragement that has left many predicting a February cut.
As the cost of borrowing comes down, people who might have been put off from doing renovations because of the rising interest rates of recent years will no doubt start to look again about how they may expand their homes.
Material Costs and Labour Shortages
Although interest rates are a major factor when it comes to consumer finance of big-ticket items like renovations, they aren’t the only influence on whether people will or won’t undertake a home renovation.
In recent years, the cost of renovations has gone up, driven by higher material costs after the COVID-19 pandemic, and a shortage of labour, also driven by some tradies returning to their country of origin during that period.
The forecast for 2025 is that material prices have largely stabilised and will remain steady.
However, that’s not to say that issues like exchange rate fluctuations won’t cause some volatility.
Benefits of Established Builders
For that reason, engaging larger and more established renovation builders is a smart move because they have better buying power using their economy of scale, more established connections with suppliers, and are able to – and have the experience to know that they should – buy ahead.
The other general advice for people looking to renovate is that they should also look to work with a builder that offers a fixed-price contract. Again, this offers consumers protection against short-term variations.
In terms of the labour market of tradies, there are also more positive moves being made with the Federal Government’s recently announced incentives for apprentices, released in late January. Industry bodies like the Housing Industry Association (HIA) have welcomed this initiative with optimism that this will help attract and retain the key trades required for building.
Effect of Land Prices
In a recent article in the Sydney Morning Herald, HIA chief economist Tim Reardon said he expects renovation to be strong in 2025 because the combination of a slowing of new home building and a rise in land prices will convince homeowners that it’s better to renovate their existing home than to build a new one.
Fewer DA Delays
One of the other potential drags on renovation, delays to Development Applications, is also improving. The latest data from the NSW Government shows that average lodgement days in 2024-25 is down to 13 days from 17 in 2023-24, the lowest since they started publishing these numbers in 2021.
Looking to Renovate in 2025?
If you are looking to expand your home 2025, we’d love you to consider talking to Addbuild.
As one of Sydney’s longest standing design and construct builders with more than 40 years specialising in home additions and extensions, Addbuild can help you plan and execute your major renovation with a level of confidence few others can match.
Call our office on (02) 8765 1555 or send us a message using our contact form if outside of office hours.
If you are still researching, have a look at our blog, consumer guide to home improvement and masterclass to get further ideas about every aspect of renovating your home.
Searching for inspiration? Have a look at our feature projects and ‘before and after’ photos.
