Housing Industry Association: Shrinkflation has the kitchen and bathroom market

Shrinkflation has hit the kitchen and bathroom market, with values and volumes dropping, according to a new report from the Housing Industry Association.

The HIA report — which considers only kitchens and bathrooms and not the overall building industry — notes the country is currently in a period of relatively low demand this year.

It notes that the upgrade bonanza of the pandemic era — when Australia broadly channelled its inner home chef — is well and truly over.

Australians last year spent a combined $28.7 billion more on home improvements than they did in 2019, but the pandemic boom had mellowed at a household level.

“The moderation in the retail turnover of household goods is significantly outpaced by record population growth,” said the report.

“What this suggests is that each household is now spending less on their home appliances, which is indicative of the ‘shrinkflation’ phenomenon seen across different sectors of the economy.”

The report said the national home building market is likely to hit a trough this year, with the volume of new home building work entering the pipeline continuing to shrink on the back of the increasing cash rate.

Only 37,500 dwellings commenced construction nationally in the September Quarter 2023, the weakest quarter in more than a decade.

However, this is expected to recover over the next few years — albeit weakly. New starts on dwellings in the year September 2023 were at 165,600, down by 15 per cent compared to the previous year.

It has had a strong impact on the kitchen and bathroom market.

Nationally, kitchen installations in new homes fell by 16.6 per cent in 2022/23 to 173,200.

The trough is expected to hit this financial year, with forecasts it will drop by 2.9 per cent to 168,300.

The report anticipated a relatively quick recovery, with the market to breaking the 200,000-mark in 2025/26.

The value of kitchen installations in new homes fell 21.2 per cent in 2022/23 to $6.7 billion, while individual values for each kitchen are also down slightly, by 0.8 per cent, to $35,800.

This overall value will drop further next year, down 7.5 per cent to $6.2 billion, before expectations of a recovery over the next few years.

The volume of bathroom installations in new homes fell by 35.4 per cent in 2022/23 to 350,100, but the sector is forecast to recover, peaking at 460,900 bathroom installations in 2025/26.

At this point, volumes will be back at 2016/17 levels, but are set to fall short of the post pandemic volumes.

The overall value of bathrooms in new homes fell by 59.3 per cent in 2022/23 to $2.9 billion, which is believed to be the low point in this cycle.

A recovery to $4.8 billion in 2023/24 is anticipated, peaking at $5.9 billion in 2025/26.

Surprisingly, the average value of a new bathroom was up slightly, by 5 per cent, to $23,130 in 2022/23 compared to the previous year.