Households bring out the tools

The coronavirus pandemic has dried up the home construction pipeline, paving the way for property investors and owner-occupiers to add value to their homes by renovating.

“[Covid-19] has created an opportunity for property owners to take advantage of the competitive landscape and lock in a tradesperson for some substantial remodelling,” says property advisory service Herron Todd White. “Recent incentives announced by the federal government have only made the idea more enticing for those who qualify.”

One reason Herron Todd White expects minor renovations to gain in popularity is that people have been cooped up at home and are looking for projects to complete.

“Investment properties such as older-style home units are also likely to see continued renovations as potential tenants are provided with greater choice at reduced asking rents,” it says.

“It will be imperative that investment properties are presented in the best possible condition, otherwise tenants will quickly choose a competing property in superior condition or, alternatively, demand a discounted rental price for any sub-par properties.”

Of course, renovators need to consider their goals and the demands of the marketplace.

“A few significant aspects to consider when deciding to renovate are in relation to possible heritage restrictions, planning limitations, site access and the scope of works being carried out,” says Herron Todd White.

Australia’s superannuation industry has held up against the Covid-19 pandemic, according to Australian Prudential Regulation Authority’s quarterly industry snapshot. Though the pool contracted 7.7% during the first three months of 2020, it decreased by just 0.3% over the year to April 30, 2020. “Compared to the 23% fall in global stockmarkets in the first quarter of 2020 as well as the 14% fall over the 12-month period to March, this is a stunning result,” says Alex Dunnin, executive director of research at Rainmaker Information, which publishes Money magazine. Dunnin notes that while the SelectingSuper MySuper performance index, which is compiled by Rainmaker, fell 11% over the three months to the end of March, over 12 months the index dropped just 4%. During the GFC of 2008-09 the index fell as much as 21%.

Yet some parts of the super sector performed worse than others. The not-for-profit (NFP) segment contracted 5% in the March quarter, while the retail fund sector shrank 12%. This difference parallels the varying exposure that NFP and retail funds have to equities.

“APRA figures show the retail super fund segment holds 24% of their investments in Australian equities, compared to just 15% by NFP funds,” says Dunnin.

“Retails funds are more vulnerable to fluctuations in equities markets. However, industry super funds with a larger share of their investments in unlisted assets such as real property, infrastructure and private equity were better insulated from the worst of these equities falls.”

During the March quarter, funds received $29 billion, taking the value of total contributions for the past year to $121 billion, further adding to these funds’ liquidity.

“This is the highest contributions inflow in more than two years,” says Dunnin. “These added contributions are often missed when analysing these ‘vulnerable’ funds.

“Sure, they may have a higher than average proportion of younger members; however, they receive hundreds of millions in contributions each month.”