Interest Rate Hikes Hit Home Improvements Industry
Things have certainly been changing across Australia as the country emerges from two years of COVID-19 lockdowns. Salaries for a range of professionals in all industries have taken some serious hits due to Australia’s ongoing economic downturn.
Interior design wages in particular, have been hit hard by the recent interest rate hikes for a few reasons. For example, the rising costs of materials and labour are just some of many key contributing factors to the reduction of employment opportunities for virtually all professionals and tradespeople operating in the property and home improvement industries.
And even if design agencies are able to source adequate materials and acquire the necessary funds to cover rising labour expenses, higher interest rates are still making it increasingly difficult to turn a profit. As a result, many interior designers are being forced to take on additional work, or even leave the industry altogether.
The situation is similar in other trades within the home improvements industry, such as carpentry and plumbing. The higher interest rates are making it difficult for homeowners to afford necessary repairs and upgrades. And as you may imagine, this decrease in consumer spend is having a ripple effect on the industry as a whole, with many businesses beginning to experience a thinning of their customer base.
However, it is not all doom and gloom for those looking to commence a career in interior design and home improvement. With the costs associated with home improvement services being higher than usual, now is the perfect time to kickstart a career in the home improvements sector.
We’ll be taking a closer look at the difficulties facing the industry as a whole alongside providing an overview of industry projections that aspiring interior designers and other home improvements professionals are likely to find very comforting.
Surging Construction Costs in Australia
Construction costs in Australia have been on the rise in recent years, due to a number of factors. The first is the increasing cost of raw materials, such as timber and steel. The second is the shortage of skilled labour, which has driven up wages. Finally, international currency exchange rates have also made importing and exporting goods a more complex and expensive process, with additional costs being sent directly to materials providers and then onwards to homebuilders or consumers themselves.
All of these factors have contributed to an increase in the cost of construction. However, there are some signs that the situation is starting to improve. In Australia, the cost of raw materials has begun to stabilise, and the availability of skilled labour is slowly but surely starting to increase as well, as local professionals and materials providers work to fill the gaps in industry supply and demand. As a result, construction costs are expected to start levelling off in the very near future.
House Values Continue to Drop
The total value of residential buildings approved by the Australian Bureau of Statistics (ABS) fell by 20.2 per cent year-on-year in April 2022, following a contraction of 21 per cent in March 2022. In cumulative terms, the value of residential permits issued fell by 11.6 per cent year-on-year in the first four months of this year, from $30.3billion between January and April 2021 to $26.8billion.
This data suggests that the housing market continues to slow down, despite low interest rates and government incentives such as the HomeBuilder scheme. This is likely to continue to weigh on economic growth in coming quarters.
What Do Interest Rate Hikes Mean for the Interior Design Industry?
Despite the fact that 2022 has heralded many interest hikes, the presence of these hikes isn’t necessarily an indication of trouble on the horizon or economic upset. In fact, the interest hikes experienced over the course of 2022 are in some instances, a sign that the home improvements industry is set to experience positive growth trends in the months to come.
When the Federal Reserve raises interest rates, it usually means that the economy is doing well. That's because when the economy is doing well, inflationary pressures tend to build. As a result, the Federal Reserve often raises interest rates in order to keep inflation in check. Higher rates make it more expensive for businesses to borrow money, which can slow down economic growth.
And when economic growth slows down, businesses are less likely to invest in new projects, including interior design projects. So while higher interest rates may not have a direct impact on the interior design industry, they can indirectly affect demand for interior design services. Once interest rates drop again, however, home improvements professionals like interior designers are likely to experience an influx in business enquiries, as well as increased opportunities to source materials at competitive costs. In this regard, home improvement professionals like interior designers have a lot to gain from using this ‘ebb’ period to strengthen their businesses and prepare for the ‘flow’ of business that’s on the horizon.
The Good News: Industry Projections Are Looking Bright
As interest rates rise, many industries feel the pinch. But the interior design industry is actually doing quite well, thanks to Australia’s comparatively continued consumer interest in home improvement.
Even as interest rates rise, consumers are still interested in making their homes look nice. They might not be able to afford major renovations, but they're still willing to invest in small changes that make a big impact, and the costs of these ‘small changes’ nationwide adds up to billions of dollars in consumer spending. That means there's still plenty of work for interior designers who are skilled at working with limited budgets.
So if you're thinking about a career in interior design, don't let rising interest rates scare you off. The future is actually looking quite bright for this booming Aussie industry.
Why The Interior Design Industry is Booming
There are many reasons why the interior design industry is booming. One reason is that people are spending more time at home following COVID-19 lockdowns, and they want their homes to be comfortable and stylish.
Another reason is that housing prices have increased across Australia, so Aussie homeowners are naturally spending more money on renovations and design in order to further increase the value of their properties. Additionally, there have been growing trends towards responsible and sustainable living, and many people want their homes to reflect their values.
Finally, social media has also made people more aware of interior design trends and has given them the ability to find inspiration and connect with designers from all over the world. All of these factors have contributed to the unprecedented growth of Australia’s home improvement industry, both during the pandemic years as well as in projections for Australia’s economic recovery.
Simply put, a career in interior design is a great opportunity for those who are creative and have an eye for detail. The job outlook for interior designers is good, and the demand for their services is expected to grow significantly in the coming years.
Daily Bulletin
