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Find your niche in the home improvement market

Words:
Brian Green

After spiking during the pandemic, home improvement applications have since fallen to their lowest level in a decade. But small practices reliant on such work should note that some specific types of work have surged

RIBA Award winning Peckham House by Surman Weston.
RIBA Award winning Peckham House by Surman Weston. Credit: Jim Stephenson

The cost-of-living crisis is proving a challenge for most households but, for Britain’s architects, it has wider implications. There is growing evidence that the squeeze on household budgets is changing the shape of the home improvement market.

This matters, particularly for smaller architectural practices, which rely heavily on the housing sector for more than two-thirds of their income. Generating plans and overseeing home improvement projects represent a large slice of that income, so shifts in the market have potentially big implications.

The latest Barbour ABI analysis of home-improvement planning applications shows a market in steep decline as households cut back on spending. But it is the nuance in the numbers that potentially holds greater interest.

After a spike in applications for home improvement work in 2021, the numbers started to fade and, in 2023, fell to the lowest level for a decade (see Chart 1 below).

Chart 1.
Chart 1.

It should come as no surprise that the cost-of-living crisis has prompted a drop in the level of home improvement. As Chart 2 (below) illustrates, the submission of planning applications for home improvement work swings with consumer confidence. As measured by GfK, consumer confidence has fallen severely post-pandemic.

In 2023, there were fewer home improvement planning applications than in 2013. And if we consider the increase in the number of private homes, applications per 1,000 homes are at the lowest level since 2012.

Rough times for households quite sharply convert to a drop in the appetite for investing in home improvements. In turn, this hits the workloads of smaller architectural practices.

But it is not just the level of work that has changed. The cost-of-living crisis, driven largely by rocketing energy prices, has had other effects. It seems to have altered the types of home improvement that households are choosing. Furthermore, the squeeze on household budgets is also changing where activity is taking place and the types of homeowners who are willing to invest in doing up their homes.

Chart 2.
Chart 2.

One of the more intriguing aspects of the Barbour ABI analysis is how the emphasis on different types of home improvement shifted before, during and after the pandemic.

Before Covid-19 there was a weakening in the market. But when the pandemic struck and lockdowns were imposed, it prompted a profound change in attitudes. Households placed greater value on their homes, which manifested in a greater desire for more inside space and better outside space. People invested heavily in doing up their homes, adding new rooms and improving others, while some households invested in home offices. They also spent very heavily on doing up their gardens.

The pandemic greatly limited spending on holidays, eating out and other entertainment outside the home. This boosted household savings, particularly among the more affluent. A big slice of this enforced saving then found its way into the home improvement market.

After lockdowns were lifted, the initial enthusiasm understandably waned. And as rampant inflation began to squeeze household finances, activity inevitably declined sharply. Home improvement planning applications in 2023 dropped 12 per cent, falling 8 per cent below the pre-pandemic 2019. Big-ticket investments such as loft conversions were down 5 per cent and extensions were down 16 per cent on their 2019 levels.

But as Chart 3 (below) shows, applications for other types of improvement have surged, most notably those for solar panels and insulation. Not that applications are always necessary for these but the huge increase in their inclusion in home improvement applications illustrates a major shift. An application can, of course, include multiple types of work.

Chart 3.
Chart 3.

A more than doubling of applications that cite insulation, and a tripling of applications for solar panels represents a step change in activity. It also signals a shift in households’ attitudes towards energy efficiency. This major shift towards renewables is also seen in recent data from the Builders Merchants Building Index, which saw a major lift in sales of renewables and water-saving products against a background of falling sales overall.

Britain has a very old housing stock compared with the rest of the world, with many very energy-inefficient homes. The rise in energy prices has clearly struck a nerve and prompted action, with households recognising how financially vulnerable they are to spikes in energy prices.

This raises the question of how durable this shift towards improving energy efficiency will prove as fuel prices fall. But it does answer some questions over how effective raising energy prices can be in promoting action over climate change.

Another interesting shift that Barbour ABI gleaned from its data was that the flight to the countryside experienced during the pandemic appears to have continued into 2023. The data found the local authorities where home improvement applications in 2023 were above their 2019 level were skewed towards those in or near highly attractive parts of Britain, such as Dumfries & Galloway in Scotland, Broadland and South Norfolk in the East, and Rossendale in the North West.

Furthermore, the analysis also suggests that areas with easy access to the seaside performed better than average on home improvement planning applications between 2019 and 2023.

Chart 4: Change in number of applications by region as well as Great Britain as a whole.
Chart 4: Change in number of applications by region as well as Great Britain as a whole.

Using classifications by postcode from the Consumer Data Research Centre, the research also pointed to shifts in the types of locations where home improvement applications had risen rather than fallen between 2019 and 2023.

It showed that overall applications for home improvement were down in ‘outer suburbs’ and ‘high-density urban core’ compared with 2019, while there was a rise in areas classified as ‘rural residences’ and ‘inner city and town centres’. This was most evident in Wales and the north of England.

Perhaps unsurprisingly, the analysis suggests that the resilience in the market is weighted towards the wealthier parts of the country. And it argues that, as the cost-of-living crisis continues to bite, this shift is likely to become more entrenched. Certainly, the better off will be better placed to find the funds to invest in energy-saving measures.

Looked at regionally across Great Britain, Wales saw the biggest fall in 2023, with the London market least dented (see Chart 4 above). This is partly down to London experiencing less of a boost during the pandemic. When we compare the number of applications made in 2023 with the 2019 level (Chart 5, below), Wales still comes out poorly but London also performed far worse than average.

Chart 5: Change in number of applications by region as well as Great Britain as a whole.
Chart 5: Change in number of applications by region as well as Great Britain as a whole.

Looking forward, the picture remains concerning. Chart 6 (below) shows how closely the home improvement market tracks the activity in the wider private housing sector. There is a strong correlation between applications for home improvement and housing transactions. This, of course, does not necessarily mean that home moves directly generate home improvement, although some may. It does, however, suggest that the home improvement market does move in a similar way to the overall housing market.

Among the array of forecasts for property transactions, the Office for Budget Responsibility suggests it will be a rocky ride before transactions get back to solid growth at a level near to that seen before the pandemic.

Chart 6.
Chart 6.

Meanwhile, the latest construction output forecast from the Construction Products Association points to a fall of 4% in private-housing repair maintenance and improvement this year, followed by a bounce back with 3% growth in 2025 and 4% in 2026.

This suggests that finding niches in the market may provide a key to success for architects looking to prosper in the home improvement market, certainly in the short to medium term.

 

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