As shoppers emerge from a lockdown-induced spending coma, albeit slowly in Auckland, there’s good news and bad for business owners.
Shoppers’ behaviour following previous lockdowns suggests that when mobility is restricted, spending is deferred but not permanently suppressed. That’s good news if you can ride out the restrictions and/or operate your business in Level 3.
Fortunately for those in the home improvement sector, tradies are back on the tools and homeowners are still enthusiastic about renovating their houses.
Economist Tony Alexander recently surveyed 1,094 New Zealanders about their spending plans for the next 3-6 months. While spending plans have fallen overall, home renovations are still the most heavily favoured area of extra spending. People also plan to spend more on gardening equipment and supplies, a result no doubt boosted by the arrival of spring.
Not surprisingly, hospitality fares poorly and international travel is the least favoured area of extra spending (and as Tony notes, the least possible!).
45% of those surveyed were in the Auckland region, and 77% were aged between 31 and 65, so it’s a good representation of people likely to be in the market for home improvement products and services. A net 27% of people plan to spend more on home renovations in the next 3-6 months, taking us to early 2022.
Over the previous year post-lockdown, increasing house prices boosted home equity and gave homeowners more confidence to improve their homes. Some of this work would have been funded by savings freed up by cancelled travel plans.
In the September survey, the proportion of people planning to buy a house to live in was the highest it’s been since February, just before loan to value ratios were reintroduced. It’s not unusual for home buyers to make improvements to better suit their lifestyle, so this is another reason to be optimistic.
Another bright note is a lift in the percentage of people whose reasons for planning to spend more include helping the business sector, up to 13% (from 7% in most recent months). This is the highest since October last year.
Plans for spending on home renovations have remained strong ever since August 2020, with the exception of April this year. Tony predicts that expenditure in this area is likely to fall away quite sharply at some stage, triggered by interest rates rising, house prices levelling off, and the borders reopening.
That said, he expects that when this lockdown ends, we’ll see a recovery in spending plans similar to the rebound when Auckland emerged from the August 2020 lockdown.