Last month touched on predicted housing prices in 2022. Of course, as the core definition suggests, homes are a key consideration in DIY and home improvement in that the home improvement and DIY industry acts as a partner in people’s lives to maintain and improve their homes. This was recently highlighted by Marvin Ellison, CEO of Lowe’s who shared that “about two-thirds of the company’s sales are driven by repairs and maintenance”.
One of the key factors influencing the amount individuals are prepared to invest in their homes depends on the value of these homes. However, how does this picture look across the world? What impact might housing stock have on the industry? And how can stakeholders take advantage of this?
Evolution of Housing Prices
As readers will recall, 2008 saw housing prices plummet globally, acting as the catalyst for the Great Recession experienced in the following years. However, since then, housing price has risen across the world.
Countries that have experienced a large increase in house prices
For example, throughout Europe housing prices have seen a huge growth in the last 10 years. As the Global Property Guide display, 9 European countries (Iceland, Estonia, Ireland, Sweden, Malta, Luxembourg, Portugal, Germany and Austria) have all demonstrated more than a 50% positive house price change in the last 10 years in real terms, with Iceland showing a positive change of 81.79% in this time. The picture is similar in the USA and Canada, which have demonstrated a 62.29% and 59.99% house price change in real terms in the last 10 years respectively.
Moreover, the Covid-19 pandemic saw a jump in house prices and the desire for homeownership. As the European Central Bank reported “Aggregate euro area house price dynamics have remained robust during the coronavirus (COVID-19) pandemic” demonstrating the highest growth rate since mid-2007. Furthermore, despite these increase in house prices, the desire for homeownership, at least in Germany, remains strong.
What will the housing markets look like in 2022?
It’s hard to predict, but a precautious glance suggests that elevated prices, low inventory, and fast turnaround will all be present in the housing market this year. Furthermore, we might see the continuation of the trend of houses selling within hours of being listed. All of these factors will put young buyers, for example Millennials who are now at peak first-time home-buying age, at a disadvantage.
The Housing Stock and New Homes
Throughout the world, and especially in Europe, we are also experiencing an aging population and an aging housing stock. Of key consideration here is that, in general, this aging housing stock is in greater need of repair and refurbishment.
For example, in the UK, only 7% of homes were built after 2000, with 38% built before 1946. This makes the British housing stock older than any other European Union country.
However, housing stock is not only old in the UK. As the below pie charts demonstrate, and as highlighted in the BPIE, “more than 40% of our residential buildings [in Europe] have been constructed before the 1960s.” Of particular consideration, and a topic for future discussion, is the energy saving potential of old buildings and the heating system performance, as most of these were constructed when energy building regulations were very limited and heating was not as efficient as today.
Age categorization of housing stock in Europe
How the DIY Sector can Benefit from the Housing Market
To reiterate the introduction, the home improvement and DIY industry acts as a partner in people’s lives to maintain and improve their homes. Moreover, with rising house prices, homeowners will be more willing to invest in their homes as they will experience a higher return on investment.
Why renovate your home?
In addition to this, considering the aging housing stock, particularly in Europe, as well as the renewed focus on sustainability we are seeing throughout the world, as we move towards a greener economy, people may invest into environmentally friendly projects in their homes. These projects could include solar panels, Domestic Ground Source Heat Pumps, insulation of roofs or cavity spaces, or even charging stations for electric cars, including a battery system.
Last but not least, as shared by Marvin Ellison, a large proportion of sales in the home improvement and DIY industry are generated from repairs and maintenance, and as housing stock ages it usually requires more home repairs and maintenance. Ensuring customers can get the products they need to complete home repairs and maintenance, and have the knowledge to do this, is key to tapping into this market segment.
However, we must not overlook the most fundamental question: why renovate your home? As the saying goes, “A man’s home is his castle”. Homes should be invested in not only to increase the value of your home, but also aesthetic value and for comfort of the inhabitants. Furniture and decoration must not be overlooked as areas of investment in home living, not just general maintenance.
Housing prices are set to continue to increase, with economists arguing that we will not see a crash as in 2008 due to two primary factors: tight supply and rising demand. As highlighted by Sarah Coles, personal finance analyst at Hargreaves Lansdown “There are no signs of imminent house price deflation because the race for space and the welcome return of first-time buyers are continuing to breathe life into the market. We still haven’t finished the process of reassessing how and where we want to live in a post-pandemic world.” As for Marvin Ellison and Lowe’s, he predicts that Lowe’s will benefit from “rising home values and an aging inventory of U.S. homes.” If other stakeholders keep this in perspective this should also be the case for them.
