General statistics about loans for homes tend not to really answer to the needs of the hardware industry. Those stats include a large number of existing homes trading owners. While that is important to the market in general (especially as regards to DIY and renovations), the most significant contribution for independent retailers and their suppliers comes from new builds.

In these statistics, HNN is concentrating on stats for loans obtained both to construct homes and for the purchase of newly constructed homes. These are viewed both in terms of the number of houses, and their aggregate value, and further broken down into those for owner-occupiers and those for investors.

The graphic which opens this article illustrates the percentage change in all building work done in the five major states. As this shows, while we're accustomed to looking at high growth numbers for dwelling construction, the overall picture for construction has not been quite so good - with the possible exception of Western Australia (WA) (though not on a net basis through the charted period).

The charts for loans are based on periods which run from August through to July (with July 2022 the most recent data available. We refer to these as periods (p), to p2021 is the period between August 2020 and July 2021.

New South Wales

Chart 1 shows the housing loans for New South Wales (NSW) taken out by owner-occupiers.

This shows what is a common theme across several of these charts, namely that p2021 was something of an exception as contrasted with p2020 and p2022.

Graph 1 on the chart shows a surge in the number of loans taken out for the purpose of house construction from around September 2020 through to July 2021, though numbers continued at an elevated level through to December 2021, before hitting lows in both January 2022 and April 2022. Graph 2 shows that the aggregate value of those loans more or less keeps pace with the growth in numbers through p2021, but in p2022 shows a relative increase, reflecting both market price increases, and increased construction costs.

In terms of numbers of loans for newly erected houses, p2021 follows the surge in loans for constructing houses through to December 2020, the falls steeply for January and February 2021, before resuming a similar patter to graph 1. Interestingly, though, when it comes to values, where the value of loans for house construction during p2022 is entirely above the level for p2020, for the erected house loans the valuation is much closer to that for 2020.

Chart 2 shows the same stats for house loans taken out by investors.

Graph 1 on this chart shows that while there was a moderate spike in March 2021, it was not until May 2021 that investor loans grew strongly for construction, a trend that continued to a peak in June 2022. Graph 2 shows that aggregate value continued very much in trend with graph 1.

Graph 3 of Chart 2 shows number of loans for erected homes taken out by investors. This begins with a surprising high number of loans from August through to December 2019. It's not really until a year later, in December 2020, that the graph shows a new surge in the number of loans, with a second, lower surge in March 2021.

For most of p2022 the number of loans remains subdued below past levels, and is particular low in January and February of 2022, with a low streak from April to July 2022. Graph 4 of Chart 2 shows the value of the investor loans for erected houses, and mostly follows the trends of graph 3.

Victoria

Chart 3 details the loans taken out by owner-occupiers for houses in Victoria (VIC).

Graph 1 of this chart is a classic illustration of just how different p2021 turned out to be for the housing market in this state. In a trend that really ran from August 2020 through to August 2021, there is a very high arc in the number of loans issued for house construction, hitting a peak of 2700 in December 2020. Graph 2 shows aggregate value mostly tracking the number of houses, except for the second half of p2022, where the value tracks higher, indicating increased house prices.

Equally, it's interesting just how quickly activity reverts to past levels, with p2022 tracking close to p2020 from October 2021 onwards, though with a slight lift in May and June 2022 (perhaps as some house prices declined).

Loans for erected houses behaved quite differently, with the number of these remaining more in line with the past, until January 2021, with elevated levels continuing on to July 2021, as shown in graph 3. Again, graph 4 shows aggregate value closely following numbers, though the second half of p2022 shows elevated levels of value.

In terms of loans for investors, Chart 4 details those numbers for VIC.

Graph 1 shows something a market almost inverted from that for owner-occupiers in the state for house construction loans, with increased numbers only beginning in May 2021, and continuing through to July 2022. Aggregate values closely follow the same trends, as shown in graph 2.

Looking at the trends for recently erected houses in graph 3, there is the same steep fall for January and February 2020, as seen for NSW, followed by largely "normal" trends thereafter. It's interesting to note that investor loans for erected houses through the second half of 2022 have fared better in VIC than NSW. Again, aggregate values largely follow the same trends, illustrated in graph 4.

Queensland

Queensland (QLD) shows a trend for loans issued to owner-occupiers for house construction that is very similar to that of VIC, as indicated by graph 1 of Chart 5.

As with VIC, there is a grand arc in numbers of loans for construction by owner-occupiers, reaching a peak of over 1800 in December 2020 and February 2021. That is matched closely by the aggregate value of those loans, illustrated by graph 2.

Graph 3 shows that the number of loans taken out by owner-occupiers for recently erected houses does not surge as much as that for construction. However, there is still a significant increase that begins in August 2020, and continues through to December 2021. After that, however, the level reverts to that for p2020. Graph 4 shows that while the aggregate value roughly follows the trend of graph 3, there is an increase in per loan value for much of p2022.

Chart 6 shows the stats for loan issuance to investors for QLD.

Graph 1 again duplicates some of the features of the same chart for VIC. The number of loans for constructions issued to investors for p2022 is above the historical level. As with VIC, that surge began in the second half of p2021, with a steady increase from February 2021 through to May 2021, then the start of higher levels that persist through to July 2022, albeit with a trough for January 2022. Graph 2 shows aggregate value largely tracking the increases and decreases in number of loans.

Graph 3 shows the number of loans issued to investors for recently erected houses. It's a marked feature of this graph that the number of loans deteriorated sharply from March and April 2020 through to July 2020, and remained at a subdued level through to February 2021. Since then, it has become a largely volatile market with sharp peaks in December 2021 and May 2021, but also deep troughs in January 2022 and April 2022. While graph 4 shows that aggregate loan values have tracked numbers, there are also some exceptions to this, notably in July 2020 and March 2021.

South Australia

The sharp uptake of loans by owner-occupiers for house construction during p2021 is present in South Australia (SA) as well, though the big surge is delayed until February 2021 for the state. This is shown in Chart 7.

As graph 1 shows, the peak of over 950 loans was reached in March 2021. That surge lasted, in diminishing form, through until September 2021, after which the number of loans remained above that for 2020. Graph 2 shows that aggregate value of loans closely followed the numbers, though values seemed to have increased in the second half of p2022.

The peak for construction loans was echoed somewhat in loans for recently erected houses, as shown in graph 3. The surge began in February 2021, and continued through to December 2021. The peak was close to 200 loans issued in June 2021.

However, there was a partial collapse in this market in January 2022, which eventually saw loan issuance drop down to just 60 in April 2022, before recovering to over 120 in May 2022. As graph 4 indicates, aggregate loan value largely followed loan numbers.

Chart 8 shows house loan issuance for investors.

For construction loans, there was a comparatively mild surge from February 2021 to July 2021, with a peak of around 95 issuances in May 2021, as shown in graph 1. Starting with p2022, however, a new surge bean eventually reaching over 150 in March 2021, and 160 in May 2021. As graph 2 illustrates, aggregate value largely followed issuance numbers.

When it comes of loans for recently erected houses for investors, the comparatively small market creates a great deal of volatility. The only really outstanding feature from graph 3 are the peaks for August 2021, November 2021 and December 2021. Prices largely followed loan numbers, as shown in graph 4, except clearly for the August 2021 peak.

Western Australia

Western Australia (WA) shows a high rate of growth for home construction loans by owner-occupiers during p2022, as with VIC and QLD. This shown in graph 1 of Chart 9.

However, this is quite a late change, beginning in September 2020, and continuing through to August 2021. It features a steep fall in numbers in April 2021. From September 2021 there is a relatively steady decline in numbers, until in July 2022 it returns almost all the way to the number of loans issued in July 2020. Graph 2 shows that aggregate loan value largely tracks loan numbers.

The market for loans taken out by owner-occupiers for newly erected houses is substantially smaller than that for house construction loans, as graph 3 shows. The former shows something of an inverse relation to the latter. After a peak of over 260 loans in October 2020, from November 2020 to February 2021, as the construction loans peaked, the erected house loans remained under 200, then surged in March 2021, just before the construction loans fell steeply. Loans for p2022 indicate the same kind of gradual decline through to July 2022 as did the construction loans. Again, aggregate loan value is largely in-step with numbers of loans issued.

For house construction loans issued to investors, as shown by graph 1 in Chart 10, there is something of a unique pattern.

The number of loans issued begins to increase in October 2020, and effectively continues on smoothly through to April 2021, following a similar seasonal incline. In May 2022 (even as interest rates are rising) the number of loans reaches a new peak, followed by a higher peak in June 2022, then a steep decline in July 2022. It's interesting to note that at this time, the aggregate value of the loans does not follow those increases, peaking in May, but decreasing sharply for June.

There is a unique pattern for loans to investors for newly erected houses as well, as shown in graph 3. Growth begins in March 2021, and continues through to July 2022, except for a trough in January 2022. However, the aggregate value of these loans follows a complex pattern that would suggest a considerable surge in prices through p2022.

Analysis

The two sharpest "takeaways" from these stats is about both how unusual p2021 (which closely follows FY2020/21) really was, especially for loans for home construction, and how quickly that influence has faded looking at p2022 in almost all states.

That sheds some light on the behaviour we've seen in many builders, those which have over-committed to house builds at prices predicated on lower costs of material supplies. It is possible that effectively, they've been trying to grab hold of a market that is fading as rapidly as it has arrived.

There is also a real question posed here, as to just how rosy a future the house construction industry can really look forward to. While various building industry organisations offer assurances that the backlog of work is so large that it will take until 2024 to effectively clear it, is there really any guarantee that demand will return during or after that time?

The Bunnings Caboolture outlet will span more than 13,000sqm and have parking for over 400 cars.

Regional operations manager Margaret Walford said the new Bunnings would provide greater convenience to local residents living in the growing area of Caboolture and surrounding suburbs, and complement existing stores located in the Moreton Bay Council area. She told the Caboolture Shire Herald:

The opening will be celebrated with a range of events and in store activities...

Some delays were experienced due to COVID-19 related challenges and wet weather, but the store development will be completed not long after the previously announced time frame. Initially, the store was planned to open in the second half of 2022.

The new Bunnings forms part of the $80 million retail precinct at the Big Fish business park, on Pumicestone Road. A Caltex service station and McDonald's were built at the 15ha site in 2018 and 2020.

Plans for a shopping centre, which will be anchored by Coles and Chemist Warehouse and a Red Rooster have also been approved. Further plans for a PetStock retail centre and veterinary service were also lodged with Moreton Bay Regional Council in August 2021.

The huge retail centre will service not only the growing Caboolture region but also the future residents of Caboolture West - a satellite city set to be home to close to 70,000 people within the next 40 years.

Related

The brand-new Bowens Warragul store is the first of three new store openings in the coming months for the group with Melton (due to open in October) and Cheltenham (in February) as well as major extensions planned at existing sites in Hastings and Epping.

The Warragul site will not only better support local builders, but relieve demand on the neighbouring Pakenham store, delivering quicker supply for local businesses, saving them time and money.

With 35 planned new full-time jobs for the area, Bowens has recognised an increased construction demand across West Gippsland.

Bowens is proud of its top-quality customer service, with account managers prioritising developing strong relationships with local builders and the broader community, as construction demand in the area continues to grow. Bowens director and chief investment officer, Andy Bowen told the Warragul & Drouin Gazette:

We are excited to be formally opening the doors of our newest store in Warragul, marking the seventeenth store in Bowens' network across Victoria.

We've been watching the demand in the area grow and are proud to be able to better service local builders in and around Warragul.

We'll be looking to support the community in meaningful ways outside of building supplies and look forward to better connecting with the people of Warragul. Part of that will be hiring local talent and creating jobs for people in West Gippsland and the surrounding areas.

Some staff already living in the Warragul area will be relocating from the established near-by Pakenham store.

The size and location of the Warragul store will create more full-time employment opportunities as we scale up, eventually aiming to have 35 full-time employees based out of Warragul.

Long-time employee and Bowens Warragul store manager, Dean Armstrong said:

I've worked with Bowens for 19 years, living in Warragul for 11 of those, so I know the community really well.

As Warragul store manager, I'll be able to work closely with builders in the area and better understand their ways of working, projects and priorities. Our main goal is supporting local builders, keeping up with increasing demands and ensuring our orders are delivered in full and on time.

The new store will represent a great opportunity for Bowens to support local causes and groups, showing our commitment to the local community.

Hitting the ground running, we're bringing some of our experienced staff from the Pakenham store across, ensuring our top-quality service remains.

The Bowens Warragul store will integrate existing and new employees, with many team members already living in the Warragul area moving across from existing stores.

Related

Manufactured in Australia from 100% recycled paper, Gyprock's Enviro Paper Tape is a more sustainable solution for setting plasterboard joints and angles, without compromising on performance.

Typically used to provide strength and to offer crack resistance in joints and corners, jointing tapes are bedded into a layer of base coat or all-purpose compound before the second coat and topping coat is applied. They are also used in conjunction with patching compounds to repair dents, cracks and holes in plasterboard walls and ceilings.

The new paper tape is high tensile strength and features a rough surface that provides better adhesion and the creation of strong joints. The Enviro Paper Tape is also perforated to prevent air bubbles forming under the tape and is designed with a crease along the centre line to provide a high-quality finish on corners and improved performance in automatic taping tools.

Featuring an ivory-coloured paper face and brown paper-back, the tape is easy to identify for correct orientation when installing. The 52mm wide tape is available in 70m and 140m rolls to suit all project sizes.

It is suitable for use on wall and ceiling joints and can be used in fire rated systems.

Enviro Paper Tape can be used with all base coat and all-purpose compounds and is recommended for all plasterboard joint and repair types. As buildings continue to have a massive impact on the environment, both in their construction and use, incorporating more sustainable solutions like the Gyprock Enviro Paper Tape can make a small but important difference.

Hybrid glove

MaxiDex from ATG Intelligent Glove Solutions is a hybrid glove that combines the best of mechanical handling gloves and disposable gloves.

MaxiDex is certified to EN ISO 374-5 VIRUS and incorporates a virucidal, ViroSan[tm], within the coating which not only protects worker's hands, but also their health. ViroSan[tm] prevents the spread of viruses which may deposit on the glove surface, and has been successfully tested against NL63, the human strain of COVID.

With all-day use in mind, MaxiDex includes AD-APT(r) cooling technology to keep hands cool, dry and productive. They are touchscreen compatible and this allows workers to conduct daily tasks without the need to remove their gloves while working, and are ultra-thin ensuring comfort and dexterity. MaxiDex can be laundered up to three times at 40°C, providing a longer life of the glove which can reduce waste and save money.

The gloves are suitable for assembly works, laboratories, janitorial, hospitals and hospitality, mechanical works, warehousing, horticulture, and aged care.

Passive houses are growing in popularity in Australia as homebuyers look for energy efficiency, and a low environmental impact. The number of certified passive homes increased from 25 in 2019 to 52 in 2022.

A new two-bedroom, one bathroom house, being built on a 380sqm parcel of land at Harlaxton in Toowoomba's northern suburbs, is set to become the southern Queensland city's second passive house.

For a building to be certified as a passive house, it needs to meet several criteria including airtightness and for temperatures to remain around 25 degrees Celsius.

Features of the passive house being built in Toowoomba include double-glazed windows filled with argon gas and thermal breaks, to stop heat from coming into the building. It will also have thicker, heavier duty insulation wrapped over the house and a heat-recovery machine fitted with medical-grade filters, to keep temperatures stable.

And it will only need a small 5-kilowatt ducted air conditioning system, powered by solar panels, to deal with southern Queensland's seasonal extremes.

Owners Michael Krause and Meegan Symonds said they first looked at the concept of a passive house because they wanted to have a low impact on the environment. Ms Symonds told the ABC the designed house seemed comfortable, and the use of filtered air met the health needs of her husband, who had asthma.

The couple had been concerned about extra costs, but Ms Symonds said quotes for the project ended up only about 10% more expensive than a traditional build. She said the project has since managed to stay within their $510,000 budget for the house.

The Australian Passive House Association said the couple were part of the growing number of homeowners, builders and designers interested in the concept. CEO Alexia Lidas said demand was outpacing the number of skilled professionals who could build the homes. She told the ABC:

We're growing 20% year on year.

She said along with the concept's environmental credentials, people were also interested in passive homes because of the verification process.

Nathan Peters, director of Titanium Homes, built Toowoomba's first passive house and is helping Mr Krause and Ms Symonds with their build. He said he'd seen an increase in enquiries as well.

I've got another two three-bedroom ones I'm quoting at the moment, I quoted one last month out near Dalby, so there's definitely a bit of interest.

Mr Peters said a passive house build required a lot more attention to detail and better planning.

There's a lot of thought that goes into it to try to get all the wraps really done well and get the house totally airtight. The trades need to be thinking a lot more about their workmanship and making sure they take a lot more care.

Mr Peters said he thought the passive house concept was the way of the future, as energy efficiency and climate change became bigger considerations for buyers.

Mr Krause also expects to see more passive houses in Australia, given the concept works well in both warm and cold climates. He said:

I think it will be a lot more common because people will realise once they come in just how comfortable they are versus the traditional home where you've got those extremes.

You'll find a lot more people will be looking at building, especially once they realise that the costs aren't prohibitive.

Tiny houses

Tiny Away, which supplies turnkey-ready tiny homes to rural property owners and allows them to share in any revenue, opened its doors in June 2020. By the end of 2020 it saw a 660% increase in bookings across its 120 properties in Australia and New Zealand compared with the first pre-COVID quarter of the year, according to The Weekly Times.

Co-founder Jeff Yeo said for the first half of this year, Tiny Away had year-on-year revenue growth of almost 218%. Tiny houses in Victoria had booking increases of 40 to 75%.

The growing market has initiated an increase in demand from rural landholders keen to host a tiny house as a way of generating extra income. Mr Yeo told The Weekly Times:

Many farmers across Australia are still feeling the financial legacy and impact of bushfires, drought and COVID, and tiny house hosting offers them a way to generate income.

The idea of a tiny house stay has risen in popularity, especially in Australia and New Zealand where low-impact tourism and sustainability are sought. Mr Yeo said:

Tiny Away not only appeals to stressed-out city dwellers looking for an escape but also to travellers keen to reduce their environmental footprint.

Tiny Away plans to open an extra 300 houses over the next year. He said:

The first step has been to canvass regions that lend themselves to a Tiny Away stay - close to a major city but far enough away to give our guests a true 'escape to nature' - and then begin to recruit host landowners through a rigorous site assessment process.

Creating reliable, local partnerships was the key to their success. Mr Yeo said:

The social enterprise model within which we work with landowners means that these hosts become their own micro hoteliers, hosting tiny houses on their privately owned land, maintaining the houses, and hosting guests - all while sharing a cut of the earned revenue.

What sets us apart is our network of local landowners who make a Tiny Away stay so unique. All our properties offer something different. Some are semi-secluded and close to activities, and others are in the middle of nowhere.

Tiny Away builds and supplies houses to landowners, but there has also been strong demand from farmers going direct to local tiny home builders for the same reasons.

Universal Tiny Houses co-founder Tim Hutchins said demand for short stay, farm accommodation and Airbnb-type houses had increased to a point where they were having to knock back orders. He told The Weekly Times:

The majority of our demand is coming from the farming and rural sector seeking that extra cash income for short-stay accommodation. If you can get your five nights a week at $165 to $200 a night, and if it's done well, it can be a very lucrative earner.

Tiny Homes and Tiny Homes Australia's Henry Hangan said it was the busiest it had been yet and would build 50% more houses than last year.

About 50% of the builds are going to be lived in and 50% are for Airbnb or holiday homes.

I've been getting a lot more interest recently from the farming sector. We expect demand to continue rising. There are massive issues with rentals and houses post COVID.

A lot of younger people are looking at tiny homes to get their foot in the door with something they actually own, not paying off someone else's house by renting.

Prices vary between builders but can start from $35,000 and extend beyond $220,000 for fully optioned models.

B&Q and Screwfix owner Kingfisher has reported a significant drop in profits as it battled higher prices for raw materials such as metal and plastic and energy, as well as ongoing global supply chain disruption caused by higher demand, congestion at ports and the impact of COVID lockdowns. As a result, sales have slowed following the pandemic DIY boom.

Pre-tax profits at the FTSE 100-listed company which also owns Castorama and Brico Depot in France, fell to GBP474 million in the six-month period to 31 July, an almost 30% decrease compared with GBP669 million a year ago.

The DIY giant brought in GBP6.8 billion in like-for-like sales in the six months to July 31, a 4.1% fall from the GBP7.1 billion reported in the same period last year, but in line with analysts' expectations.

Kingfisher had a very strong first half last year because DIY stores were allowed to stay open during COVID-19 lockdowns, and the move to home working prompted many people to make DIY improvements to their homes and gardens.

This appears to be over, and Kingfisher chief executive, Thierry Garnier, warned of "a more challenging environment" as a recession looms and household budgets are hit by soaring energy and food bills. In The Guardian Australia, he said:

The cost of living [crisis] probably is worse in the UK [than France]. The French government very early on decided to cap energy prices ... We are really welcoming the decision of the new [UK] prime minister [Liz Truss] in this area.

At the same time, the company is benefiting from soaring demand for home insulation because customers had been keen to buy energy efficiency products. Mr Garnier said insulation sales were up 110% over the first three weeks in September compared to 2019, and are 82% higher year on year. Overall, across the group, insulation sales are up 70% from 2019, and 32% higher than a year earlier.

Kingfisher said it has seen a shift back to DIFM - Do it For Me with household jobs outsourced to professionals - now the pandemic has mostly past.

In the Evening Standard, Mr Garnier said sales were 16.6% ahead of pre-pandemic levels in the first half of the year.

He said Kingfisher was back to "pre-pandemic levels for in-store product availability", after supply chain problems led to gaps on shelves, and there was good demand for outdoor and big ticket items such as kitchens and bathrooms. Mr Garnier added there were no signs of customers "trading down" to cheaper ranges.

Kingfisher also warned that it expects inflation pressures to persist in the second half of the year even though raw material prices have dropped from recent highs and freight costs have slowed since January. This is because of the time lag between ordering more expensive products and subsequently selling them, the group said.

Mr Garnier said Prime Minister Truss' first priority should be to support people faced with soaring energy bills, especially those on lower incomes, but he also stressed the importance of long term measures to improve homes' insulation and energy efficiency.

The houses in this country are relatively poorly insulated. We need government decisions in this area.

Kingfisher has sent a number of recommendations to the UK government such as reducing stamp duty for homebuyers who undertake energy efficiency work.

Online sales

B&Q's new online marketplace is performing ahead of expectations, with sales from partner brands representing 8% of its online sales in August, said Kingfisher.

The move to enable partner brands to sell via the marketplace resulted in 100,000 product lines SKUs being added by about 200 partners in a month. The group now plans to launch additional marketplaces in France, Poland and in its Iberia market.

Ecommerce group sales were 19% lower than a year earlier - but 156% ahead of the same period in pre-pandemic 2019. Some 16% of sales took place online - down from 19% last year, but ahead of 7% in 2019. Digitally-enabled sales accounted for 24% of sales. That's down from 26% a year earlier and up from 20% three years earlier. Kingfisher said in its half-year statement:

Approximately a quarter of group sales are from ecommerce channels and online orders placed in-store, delivered through click and collect or to customer homes. We expect digitally-enabled sales to continue to grow over time, in line with the continued evolution of both customer behaviours and our in-store technologies and solutions.

Click and collect remains the most popular online fulfilment channel - although sales via the channel were 22% down on last year but 195% ahead of pre-pandemic levels. Home delivery sales fell by 11% year-on-year - and rose by 97% on three years earlier.

During the half-year, Kingfisher said it invested in faster fulfilment and in expanding product choice. To that end, it expanded its store-picking model to enable faster click and collect and last-mile delivery, managed orders through digital hubs - now present in 54 B&Q stores - to make home deliveries from store. It also rolled out click and collect lockers in Poland which are now being tested at B&Q in the UK, and expanded one-hour delivery in the UK through Screwfix Sprint to more than 300 shops, covering 45% of UK postcodes. The average delivery time is now 45 minutes, and its fastest delivery has been eight minutes.

It has added mobile Scan & Go into the B&Q app, expanded its self-checkout terminals and offered a wider range of 3D design capabilities.

Related

Kingfisher provides a trading update.

B&Q expands its e-commerce platform.

Kingfisher saw continued growth in most segments during 2021.

Lowe's Cos. said it has created immersive, interactive three-dimensional models of two of its US stores to achieve better visibility into inventory data and store layouts.

The models, also known as digital twins, are essentially fully virtual versions of the physical stores, updated in real time with information from sensors and point-of-sale devices such as cash registers.

Seemantini Godbole, chief digital and information officer at Lowe's, said its purpose includes helping store planners optimise layouts and better perform analytics on inventory and sales data.

Additionally, store staff on the ground can access the digital twin by wearing augmented reality headsets. They can then see detailed information about the inventory in front of them, including partially obscured items in hard-to-reach places.

"The way I think about it is, we are trying to give superpowers to our associates [store staff]," said Ms Godbole, adding that floor staff tasked with restocking or reorganising inventory can check their work by overlaying a hologram of the digital twin over the actual version to ensure they've placed the correct inventory in the correct place.

Although the project is in its initial stages, Ms Godbole said it is showing promising results. So far, the digital twins have been used to better understand when two specific products are frequently bought together so they could then be placed closer to each other.

Ms Godbole said Lowe's had already done some of the groundwork for this by creating three-dimensional, virtual representations of its products to put them on its website for customers shopping online. Additionally, it already had some sensors in place.

Lowe's said it has no clear timeline for when it might extend the digital twin technology beyond Mill Creek (Washington) and Charlotte (North Carolina). Ms Godbole says it's unlikely the company would roll it out to all its stores in the immediate future. She said it might explore doing so for a handful of stores, potentially giving priority to those that frequently update their layouts to focus customers' attention on seasonal products.

About digital twins

The concept of a digital twin has been around for a while and involves creating virtual three-dimensional versions of all kinds of real-life objects or places.

Until now, most uses for digital twins have been concentrated in factories and the manufacturing sector, said Tom Mainelli, an analyst at research firm International Data Corp. Creating digital twins of machines can help train workers on how to use the machines and provide internal visibility into any problems with them without having to take them apart, he said.

One challenge with manufacturers, he said, has been the complexity of creating digital twins, especially of older machinery where information about its components doesn't already exist in digital formats.

Built by its Lowe's Innovation Labs team, Lowe's digital twin is a completely virtual replica of a physical home improvement store, created in Nvidia's Omniverse environment. It fuses spatial data with other Lowe's data, including product location and historical order information, and pulls all of these sources together into a visual package that can be accessed on a range of devices, from desktop computers to Magic Leap 2 augmented reality (AR) headsets. Jensen Huang, founder and CEO of Nvidia, said:

AI and digital twins are reinventing the retail experience for associates and customers, in person and online.

Nvidia is known for its graphics processing units - graphics chips originally designed to deliver cutting-edge performance to video games. They have gone on to help power everything from artificial intelligence calculations in data centres to cryptocurrency mining.

A few of the areas that Lowe's is currently exploring with its digital twin include:

AR reset and restocking support

Wearing a Magic Leap 2 AR headset, Lowe's store staff can see a hologram of the digital twin overlaid atop the physical store in augmented reality. This can help them compare what a store shelf should look like versus what it actually looks like, and make sure it's stocked with the right products in the right configurations.

AR "X-Ray Vision"

"X-ray vision" is the ability to gather and view information on obscured items on hard-to-reach shelves. For example, under normal circumstances, an associate might need to climb a ladder to gather information on a cardboard-enclosed product held in a store's top stock. With an AR headset and the digital twin, they could look up at a partially obscured cardboard box from ground level, and determine and view its contents via an AR overlay.

AR Collaboration

With access to a Magic Leap 2 AR headset, store staff can do more than just view the digital twin - they can also update it and collaborate with centralised store planners in new ways. If a store associate notices an improvement that could be made to a proposed planogram for their store, they could notate that on the digital twin with an AR "sticky note."

Store visualisation and optimisation

The digital twin enables new ways of viewing sales performance and customer traffic data to enhance the in-store experience using 3D heatmaps and distance measurements of items frequently bought together.

Using historical order and product location data, Lowe's can also leverage Omniverse and Lowe's created AI avatars to simulate how far customers or associates might need to walk to pick up items often bought together. Lowe's can also test changes to product placements within Omniverse to create better customer and staff experiences.

Related

In June, the retailer debuted more than 500 free digital assets in Lowe's Open Builder, its metaverse hub.

Lowe's unveiled its Measure Your Space tool last year to allow customers to scan and measure their spaces before making home improvements.

Responsible and hard-working statistical agencies such as the Australian Bureau of Statistics (ABS) suffer something of a contradiction in how they must present their numbers. At one time there is a real depth to their stats, yet they must also provide - largely for the use of the political heads of government departments - single numbers that somehow sum up what is going on in a market or a particular area of the economy.

One technique to achieve this is the use of seasonally adjusted time-series statistics. Statisticians can look back over the history of time-series, and work out how much of the fluctuations in the numbers is down to seasonal influences. They then compensate for these, so that a single number can sum up considerable complexity.

For example, with renovations we're all aware that these tend to peak for the December quarter (October, November and December), as homeowners prepare for the holidays, and the weather improves, making outdoor construction work much easier.

Similarly, the March quarter (January, February and March) is usually a low-point for renovations. Much of construction shuts down over January, and homeowners are busy enjoying their recent renovations rather than engineering new ones.

It's possible to estimate what those fluctuations will be, and allow for them, so that you can, for example, make a comparison between renovation stats for the December quarter with the March quarter that goes beyond noticing that the former's numbers are always larger than the latter's.

Unfortunately, seasonally adjusted numbers also tend to get somewhat abused, especially by journalists in the mainstream news media not as well-trained in the use of data as some of their more specialist colleagues. Take, for example, these two opening paragraphs from a recent short article that appeared in the Australian Financial Review:

Australia's pandemic-fuelled renovation boom has run its course, with economists tipping higher interest rates, falling property prices and fewer sales will weigh on growth and cause a blow-out in stretched state government budgets.

After surging 25 per cent over the past two years, alterations and additions activity - a proxy for home renovations - is in decline, falling by 1.6% in the June quarter national accounts.

To begin, it's worth pointing out that state budgets will be troubled not by a fall in renovations, but by the decline in the value of dwelling sales, as the consequent stamp duty fees will decrease in the aggregate.

Leaving that aside, we're left with this 1.6% figure, which is presented without any statistical pedigree. We simply have to assume that this is a seasonally adjusted number, and that it results from a comparison of the June quarter 2022 figures with those of March quarter 2022.

The reality, however, of seasonally adjusted numbers in the COVID-19 pandemic and post-pandemic periods is that they don't mean quite what they did pre-2020. They are still relevant and helpful, but they are no longer quite the simplification they once were.

While we're not going to be using seasonally adjusted numbers in this analysis of renovations, the stats we use do point to the complexities of adjusting for seasonality. What we will be using is chain volume measure stats.

Chain volume measures are something of a hybrid between describing actual revenue generated and the extent of activity underlying that revenue, whether that is the number of products produced or the amount of service provided. The ABS has a really good explainer for chain volume measures at the following link:

They are especially useful when looking at something like renovations, because it's not possible to determine a unit value. With dwelling construction, we have actual dwellings, and we can divide them into apartments, town houses, detached dwellings, etc. Renovations come in all shapes and sizes, with different levels of involvement in terms of services and materials.

Australia

To start with the nation as a whole, there is probably no better chart to illustrate the difficulties and complexities of seasonal adjustment than Chart 1, which shows the quarter-by-quarter expenditure on alterations and additions for financial years. This is based on the ABS national accounts, which use survey data to estimate these numbers. As such these data are more representative, as other alts & adds data rely on building permits, which don't reflect lower-cost renovations.

Looking at the top graph, we can see that FY2021 and FY2022 are unusual, starting with the December 2020 quarter. It's clear here that there is certainly a strong seasonal component to growth, but it has both been massively enhanced, and dynamically altered.

The single most significant statistical point is actually not the highest peak ever for spending in the December 2021 quarter, but the strong result for the March 2021 quarter of $10.1 billion. The average expenditure for the three previous financial years in this quarter was $8.4 billion, so this is an over 20% increase from the average.

In slightly different terms, we could say it is also contra-seasonal, as that March quarter figure is $73 million more than the September 2020 figure - which is, statistically, pretty much flat, as this is only a 0.7% difference. The average difference between the September and March quarters from FY2013 through to FY2019 was 13.4%.

Knowing the context, it's possible to explore the reasons for this surge. The previous December quarter was higher than normal, but probably still represented some repressed demand, due to COVID-19 lockdowns couple with increased expenditure on homes in general.

In HNN's opinion, the second most significant statistical point is still not that December high, but rather the subsequent March quarter for 2022. The two Marches are almost identical, with just $25 million between them, but the significance is that this pattern repeated.

In fact, looking at the top graph, it's clear that FY2022 represented a return to the seasonal patterns of the years prior to FY2021, just at a much higher level of expenditure. Repeating the numbers for the March 2021 quarter in 2022 goes some way towards seeing the market establishing a new, higher level - though it is unclear it will remain at quite this high a level into the future.

Yet in pure growth terms, of course, the March 2022 quarter could be described as a poor result, as growth was close to zero, after four prior consecutive quarters of growth of over 10%. That also holds true for the June quarters in 2021 and 2022. The 2021 numbers show growth of 25%, while the 2022 numbers have zero growth.

The underlying reality is, of course, that the market can only absorb so much growth, given current conditions. When you factor in shortage of supplies, shortage of tradies, the increase in general cost of living and ongoing slow growth in wages, sustaining a renovation market at this level is a sign of very strong underlying demand.

Chart 2 shows the alts & adds numbers across the Australian states and territories, smoothed into the aggregate numbers for financial years.

The top graph, for expenditures, shows how dominant overall the three east coast states - New South Wales (NSW), Victoria (VIC) and Queensland (QLD) - are in renovations, and how dominant, even in that group, NSW remains.

The lower graph shows the percentage change in the expenditure numbers. This does illustrate the diversity in the response, with every state and territory showing positive growth for FY2021 - except VIC. FY2022 shows a tighter cluster of growth at between 5% and 10%, with VIC now showing the strongest growth at around 14%, while Western Australia (WA), Australian Capital Territory (ACT) and Northern Territory (NT) show negative growth.

New South Wales

Given its size and market robustness, it's clear that NSW contributes very strongly to the results for Australia overall in alts & adds. Chart 3 shows the trends illustrated in the Australia graph, but somewhat accentuated.

There is the same new high level established for the March 2021 quarter, though for NSW this is considerably higher than for September 2020, by $212 million, an increase of 6.0%. The March 2022 quarter did below that quarter in 2021, but the June 2022 quarter actually exceeds the June 2021 quarter by close to 5%.

Victoria

What is remarkable about VIC is that through FY2021, the state remained matched the historical average for expenditure on alts & adds, with the December 2020 quarter actually below the historical average, as shown by the upper graph in Chart 4.

That was likely due to the effects of several long and severe lockdowns, which both limited construction work, and also motivated many homeowners to consider moving over renovation.

However, the story for FY2022 has been quite different. This shows another highly elevated level for the March 2022 quarter, and ongoing growth into the June 2022 quarter.

The lower graph details this clearly, with the state showing growth over 12% in FY2022, including for the June 2022 quarter.

Queensland

Overall, QLD shows a pattern of growth closer to that of NSW than VIC, though its crucial datapoint is probably in December quarter 2020 rather than March quarter 2021, as seen in Chart 5.

However, unlike both NSW and VIC, the state has shown a considerable reduction in growth through the March and June quarters of 2022. Nonetheless, the March 2022 quarter was 26% above the average for the three years prior to the pandemic, and June quarter 2022 was 15% up on that average.

South Australia

South Australia (SA) has its own unique renovation market characteristics. In particular, the September quarter of 2020 was exceptionally low in expenditure, followed by a return to above average for the December 2020 quarter, and then, following the NSW and QLD trend, a markedly higher expenditure for both March quarter and June quarter 2021, as shown in Chart 6.

FY2022 started with a very strong expenditure for September quarter 2021, which represented a 30% increase over the prior year. The subsequent three quarters were virtually identical to the same quarters in the prior year - which of course means growth of next to zero.

Western Australia

As the state least affected by the COVID-19 pandemic, the renovation stats for WA are subject to a wider range of influences. Its expenditures have remained broadly inline with past years, as shown in Chart 7.

While there is strong growth for the March and June quarters of 2021, this is within range of the growth in FY2018. As shown in the bottom graph, that growth was followed by a steep decline in the March and June quarters of FY2022.

Tasmania

For TAS there are really only three datapoints that standout over the pandemic period, as shown in Chart 8.

Those are for the March and June quarters of 2021, and the September quarter of 2021.

Northern Territory

As with TAS, the NT has three quarters of note, as shown in Chart 9.

Interestingly, these occurred very early in the pandemic, from June 2020 through to December 2020. However, there has also been something of an uptick in June quarter 2022, with expenditure increasing by 9.4%.

Australian Capital Territory

The ACT probably has one of the most unusual graphs for alts & adds expenditure through the pandemic. It shows a strong influence from seasonal activity - except for FY2021, when it shows very little at all, as illustrated by Chart 10.

The pandemic boost in spending starts clearly in the March and June quarters of 2020, then ends in the September quarter of 2020, followed by three quarters of very high, consistent spending of around $185 million per quarter. Then spending returns to pre-pandemic levels for the September and December quarters of 2021, before virtually duplication the elevated levels of spending for the March and June quarters of 2020.

Clearly the September quarter has some very strong seasonal influences, and the December quarter something similar, but less determinative.

Analysis

Overall, the point that these graphs really make is both that seasonality during a time of change and crisis has reduced effects on markets, and that crisis can change and alter how seasonality comes to work on a market.

The other point made is just how diverse Australia remains in terms of its responses to stimuli such as a health crisis. The two states that economically appear somewhat similar, VIC and NSW, react very differently, while NSW and QLD, which are economically divergent, do have some similarities in their responses.

Seasonally adjust numbers that apply to Australia as a whole certainly do have a place - especially in the national accounts, which are, after all, national. However, when it comes to making an economic assessment of an industry or of markets, using Australia-wide figures seldom really works.

As Chart 11 indicates, the three major eastern states do dominate expenditure on alts & adds, with 83% of the total. And those three are dominated by NSW with 37% of the overall expenditure.

However, there is surprising diversity between those three major states, as well as within the states as well. It is certainly understandable that investors, governments, public service management and even some journalists would like to simplify analysis down to a couple of numbers. But as the ABS constantly reminds us through their (radically underfunded) efforts to provide accurate and useful stats, the reality is far more complex and nuanced that the convenient shorthand would suggest.

US investment firm Goldman Sachs held its 29th Annual Global Retailing Conference in early September 2022. This was attended separately by the CEOs of both The Home Depot and Lowe's Companies, who answered questions posed by the event's host, Kate McShane.

The Home Depot

Ms McShane started off the questions for Home Depot CEO Ted Decker and Jeff Kinnaird, the company's executive vice president of merchandising, by asking whether home improvement hadn't exhausted the market through the pandemic years.

Mr Kinnaird outlined how he has seen consumer projects progress in recent years:

In the early stages of the pandemic, I think everyone painted - we probably all painted something at some point in the early stages. That shifted to this investment cycle in the backyard and the entertaining in the backyard and we saw that in categories like grills and patio and landscaping and patio heaters and other categories that were about that backyard and about that backyard experience.

That investment we still see a significant investment there. Past that, we are seeing this project-related investment ... this investment in finishing a basement and finishing a bathroom and repairing [an] issue in a home, replacing sinks and faucets and things that are seeing more wear and tear [as] the consumer spends more time at home. So we do see a transition in the business. It's a healthy transition.

Mr Decker expanded on those comments by pointing out the evolution of home painting in the North American market:

Paint is an interesting category in this dynamic ... As Jeff said, when the pandemic hit, everyone painted. The paint business and specifically the DIY - which we have pretty good visibility into if it's a Pro or DIY making the purchase. In the DIY, engagement in paint spiked in the early part of the pandemic and that reversed what has been a very long trend of painting ... It used to be a lot more, at least in our channel, used to be a lot more DIY and less Pro, but over decades now, the DIY share of actually painting has been coming down and the Pro has been going up, because most of us now hire someone to do the painting. That reversed in the first phase of the pandemic as DIYers were home, I'll paint. Now the Pro is re-emerging.

Asked about how supply chain in changing for Home Depot, Mr Decker spoke about the evolution of three different types of facilities the company is building out:

One is for big and bulky goods, which we call our flatbed distribution centres. And the great thing about those centres is, we always have had building material distribution centres for replenishment to the stores. And what we do is we move those into newer, larger, more optimised facilities and you can also deliver to job sites from those facilities.

So you leverage huge inventory quantities that can replenish a store or go to the job site. Those are, I don't know, halfway built out at this point. That's where we are getting a lot of Pro share growth as we are now able to deliver the quantities and materials on time and complete to the job site.

The second type facility that we are building, calling a direct fulfilment centre, these are both traditional pick, pack and ship e-commerce facilities, which, again, as we've started to build these out, we are about halfway built on these has been supportive of our e-com business. We've doubled our e-com business in the last two years, grew again 12% in the second quarter on top of that doubling.

The third set of assets are what we call our market delivery operations and these are flow facilities for big and bulky product. So the big and bulky product will leave the FDC, flow to the MDO. Think of this as the last mile then when it goes on a box truck and has a dense route to either job sites or homeowners and the foundation of that flow is our appliance business.

Mr Kinnaird added a comment about how these facilities were not just about throwing products on a truck.

And just going back to the flatbed deliver centre as an example, our Pros are, in many cases, demanding deliveries from those facilities. It is not as easy as just putting a product on a truck and shipping it to a Pro. If there is a process of building an order, it's how it's packaged how it's positioned for that Pro. You can make a Pro's life much more productive just how you stack goods together. So, we have Pros demanding that delivery and that's creating a lot of energy around that opportunity.

Asked about what Home Depot was doing to improve margins overall, the response was that increasing ticket size (order total cost) was important. Mr Kinnaird sees innovation as being an essential part of that.

I'd also say that part of that ticket is innovation and we continue to see an enormous amount of innovation across our business and that's virtually almost every category. I mean, it's great to see that we've got many longstanding partnerships. It's great to see throughout the pandemic the innovation pipeline didn't slow down, and our merchants have worked alongside of our partners to build an opportunity to think of the continued electrification of tools.

You think, there is dynamics changing there. I think we used the example earlier, the new Milwaukee M18 framing nailer is now the one tool you buy with the battery platform. Previously, you'd buy a nailer compressor, a cord, fittings and all the pieces that go with that process and today, it's a pneumatic nailer with this electrified nailer. That's changed the market.

Lowe's Companies

The CEO of Lowe's, Marvin Ellison, began by fielding questions about how Lowe's saw the overall market developing. He pointed to ongoing demand being driven by macro areas, such as the age of houses in North America.

Roughly 50% of the homes in the US over 40 years old, and that's probably the largest number since World War II. And we are seeing a cycle where the big home building phase that took place in the early 2000s, those homes are now turning 20 years old, which means you are getting ready to hit a whole different investment cycle.

And even though the work-from-home phenomenon is subsiding somewhat in certain sectors, I don't think any of us believe they will ever get back to pre-pandemic levels of people working in the office and not using their existing residence for home offices.

Mr Ellison was also upfront about some of the mistakes that Lowe's has made over the years.

One of the biggest mistakes that Lowe's made is that everything we did was store centric, everything we shipped, every system and every type of technology because we desired to serve the customers from our stores first. But when the customers decided that they wanted curbside and they wanted lockers and they wanted to bottom line, pick it up in store, we had to pivot. And at the time, we didn't know how to do it. And so now we've created a flexible agile model that we can easily or more easily pivot to the needs of the customer.

Mr Ellison also pointed to some of the mistakes Lowe's made with its Pro (tradie) market. One of the advantages that Home Depot has over Lowe's is a market split 50/50 between Pro/DIY, while Lowe's is more 25/75.

But then the question is, how do you serve the Pro? And so we're creating a fulfillment network of different nodes, including market delivery that will enable us to deliver products directly to the job site for the Pro.

And over the course of the past 15 years, Lowe's exited a lot of the national brands that Pros really, really migrate to. Pros are extremely brand loyal and a lot of those brands had left for a variety of reasons and we've been bringing those brands back and now getting price right.

One of the strengths of Lowe's has been its embrace of innovation in products, and the company sees this as an ongoing strength.

And for DIY homeowners, we are trying to make projects easier by upgrading our digital experience with them on Lowes.com, investing in a broader set of direct-to-home fulfilment capabilities and enhancing all of our product assortments with new innovative easy-to-use products.

...

We noted on our earnings call that one of our best selling outdoor power equipment SKUs was an EGO battery operated mower that reach out over USD700. We could barely keep it in-stock. And so what that means is that customers have a different definition of value. Value is not always just focus on price. It is focused on many other elements and we believe that if we stay closely engaged with our customers, we will always find the right level of elasticity from a pricing standpoint and we've done a really nice job so far this year.

Industrial power tools group Sydney Tools has revealed plans to build a $4.5 million hardware and trade supplies outlet in Hervey Bay (QLD).

According to the development application (DA) currently before Fraser Coast Regional Council, the project will take about 18 months to complete and support more than "30 jobs locally across various trades".

The developer is looking at a vacant block of land next to a service station located at 168-172 Main St, Kawungan. The application calls for a single storey "industrial building" that will accommodate three different retail shops. One of the tenancies will be occupied by Sydney Tools.

The 3384sqm DA indicates the outlet will have a "striking facade" in an array of colours and shapes. It will also include warehouse, showroom and storage components. In the Fraser Coast Chronicle, the application said:

The proposed development has been designed to contribute to a modern and accessible mixed use precinct with services and amenity provided for workers and customers.

Once construction is completed and the proposed development is operational, the development will support the direct employment of up to 20 full-time employees.

There will be 59 carparking spaces, including two disability car spaces, with site access on Main Street and Innotech Drive.

Sydney Tools now has more than 60 stores across Australia.

Planning for the new Bunnings outlet in Ulladulla (NSW) is ongoing. Bunnings regional operations manager, Robyn Hudson, said the company is still working on the development with a number of agencies. She told the Ulladulla Times:

Bunnings was pleased to receive development approval for a new store in Ulladulla earlier this year. At this stage, we don't have any firm timings on when construction will commence.

We continue to work with Shoalhaven City Council and Transport for New South Wales and we look forward to keeping the local community updated with progress once we know more.

The proposed Bunnings Warehouse will be located between 189 to 197 Princes Highway, Ulladulla and represents an investment of more than $16 million.

The new Bunnings warehouse will include the main warehouse, outdoor nursery, timber trade sales area, playground and will span more than 11,000sqm, with carparking for over 180 cars. It is also expected to create more than 80 additional jobs for local residents.

The current Bunnings Ulladulla is located at 131 St Vincent Street and the hardware retailer does not own the existing site.

Related

Bunnings Hoppers Crossing

The 21,670sqm Bunnings Warehouse in Hoppers Crossing (VIC) together with an Amart Furniture store was sold to ESCB Holdings, a company owned by Guirong Zhang, reports The Age.

Beau Coulter, who negotiated the sale with colleagues Billy Holderhead, Yosh Mendis and Zomart, did not comment on or disclose the final sale price. However it was listed with expectations of around $100 million.

Mr Coulter said recent interest rate rises were not dampening investors' interest in large format assets. He told The Age:

People are looking for properties with long weighted average lease expiry (WALE). Money is moving out of the stock market and residential property, which has seen changes to tenancy laws.

The properties return a combined annual income of $4,284,186, which would suggest a sharp yield under 5% for the transaction.

Property consultancy Herron Todd White (HTW) said the high cost of building materials and delays finding skilled tradies are behind a downturn in demand for dwellings that require significant additional work.

Buyers are paying a premium to avoid renovations that could cause major budget blowouts, and are currently perceived as not worth the time and effort compared to a house that is ready to move into straightaway. In the Australian Financial Review (AFR), HTW chief executive Gary Brinkworth said:

Valuers are reporting good demand for fully renovated homes across most markets, with buyers paying a premium to avoid upgrade work altogether.

Buyers and agents also told the AFR that quality renovated properties close to amenities are defying the downturn. Patrick Bright, a Sydney-based buyer's agent, said:

Buyers do not want the time, stress and drama of doing a renovation. They just want something that is finished, which means completed projects are selling at a premium.

The cost of renovating is prohibitive, and there is no certainty about how long it is going to take. This all weighs heavily on the thinking of those deciding whether to buy a doer-upper or something complete.

The number of requests for HTW's construction valuations, provided to renovators looking for an estimate of the cost to rebuild a structure, has fallen by up to 45% against a backdrop of rising interest rates, falling property prices and labour shortages exacerbating delays.

During last year's building peak, the number of renovations was growing more than 30% a year and costing more than $1 billion a month, largely because COVID-19 forced people to stay at home, according to research group IBISWorld. Renovators were also encouraged by schemes such as HomeBuilder, which offered grants of $15,000 to $20,000 for a major renovation.

But in the 12 months to June, the cost of steel increased more than 40% over that time, timber jumped about 20% and aluminium was up by about 16%, according to the Australian Bureau of Statistics. Shaun Thomas, HTW's Sydney residential director, said:

September is normally when we expect to see an influx of renovations as we wake up to the sound of hammers in the morning and a new season of The Block on TV.

Mr Thomas said renovated properties are selling for a "significant premium", typically inner-city properties with home offices in affluent areas where renovating is difficult because of development restrictions.

He said price falls of between 10% to 15% in Sydney's south-west and east are adding an "extra layer of risk for renovators, given the insecurity of where the market will be once renovations are complete". It also "stripped any potential profit" from renovation projects finished in the past 12 months.

And while HTW's valuers are reporting good demand for fully renovated homes across most Sydney markets, they also said that not all renovations will recoup their cost.

Now the cost of building and of financing were rising, along with property prices falling, there was a squeeze on the ability to profit from a renovation, the HTW report said. The result is property owners have become increasingly hesitant about undertaking renovation projects.

The scenario was likely to remain until mid-2023.

Other states

In Melbourne, HTW director Perron King warns that worker shortages in bricklaying, carpentry and roofing are at record levels. He said:

This puts pressure on the reno market, and we could see housing renovations on the decline in coming months.

In a HTW report from May, Victorians were buying new homes instead of renovating, or putting upgrade plans on hold as materials and trades shortages - and skyrocketing prices - consumed the building industry.

The May report also revealed lengthy delays, rising materials costs and challenges in getting tradies on site were discouraging homeowners from starting new improvements. In Queensland, HTW director David Notley, said:

Buyers are shunning properties in dire need of renovation. Listing pages are littered with fixer-uppers across many locations and price points.

Mr Notley also said well-renovated properties are in demand, despite slower market conditions.

While it is hard to quantify how much more buyers will pay, anecdotal evidence suggests that the price difference between renovated and unrenovated is growing.

In Adelaide, property developer Nick Smerdon said:

Renovated homes continue to achieve a premium. It's expected they will continue to do so for the short term.

Property group Mirvac has managed to cut build times by almost 25% and reduce labour hours by 11% in a pilot program using prefabrication for townhouses being built in the Melbourne suburb of Doncaster East. Labour costs typically account for 50% of the cost of a dwelling.

At its 911-home Tullamore housing estate, the developer compared the construction of two rows of four townhouses - one built using prefabrication and the other by traditional methods - and nearly halved the on-site waste generated by each new dwelling.

It will now extend prefabrication across its residential construction portfolio, according to the Australian Financial Review (AFR).

The pilot site is located on the former 47-hectare Eastern Golf Club, where Mirvac craned premade sections of double-layer "cassette" floor into place and did the same with wall panels already comprising facade panels, window frames and glass that needed only rendering and painting on site. Mirvac's residential head, Stuart Penklis, told the AFR:

Prefab and off-site manufacture is a way in which we can mitigate [time, material and labour] risks while actually improving safety and helping to achieve our aspiration to send zero waste to landfill by 2030.

For a high-cost country such as Australia, developing more efficient construction methods is a crucial issue. Companies including Lendlease, Hickory Group and Aveo have been working on this for many years. But the 2018 collapse of prefabrication-specialist builder Strongbuild showed it can be a risky business.

Prefab suppliers to builders can carry large risks in the form of products they hold, and banks can be wary about the early release of funds for products that might not be built to specification.

Mirvac started putting prefabricated bathroom pods in its apartments years ago and it has taken five years to refine the process and products to the level where they have now become a standard feature, Mr Penklis said.

The Tullamore test involved just four dwellings, but the 16-home first stage of Mirvac's Georges Cove project in Sydney's Moorebank is expanding the process to 16 homes. At Georges Cove, Mirvac has cut the time from the start of construction to lock-up - the point at which the roof is on, and the structure is watertight - from 25 weeks to just 12 weeks.

For its next venture, the 300-home Riverlands project on the site of a former golf club in Milperra (NSW), the company aims to combine prefabricated walls, floors and bathrooms to maximise the work done in the controlled environment of a factory and reduce on-site construction.

Achieving scale was crucial, particularly as prefab meant a prior outlay of money for materials, Mr Penklis said.

But actually, that is countered by the fact that your construction programs are shorter. As we increase our scale and volumes, we'll start to see the benefits from a cost perspective. But at the moment, it's probably been line-ball.

Related

Capitalising on The Block's 2022 season, Reece Bathrooms has embarked on a campaign to launch its Imagin3D digital bathroom visualisation tool for homemakers. Both the tool and creative are by Trout Creative Thinking, with support from production company Sherpa to bring the campaign to life.

Imagin3D gives renovators the ability to create and plan their dream bathroom for free using real products, materials, surfaces and colours. Visualising a bathroom look can give renovators confidence in their choices, before committing to buying products or booking trades, and helps to avoid making expensive style mistakes.

The launch campaign includes a TV commercial, in-store presence and digital marketing overseen by Trout, in addition to integration into this season of Nine's The Block where contestants use the tool to plan their bathrooms.

Software company Thoughtworks assisted with developing the digital platform and the tool's functionality is illustrated in the TV commercial using VFX (visual effects) crafted by Soma.

Imagin3D is proving valuable for home renovators embarking on their bathroom journey; with one in five Imagin3D webpage visitors signing up to use the tool, according to Reece.

Imagin3D is available via the Reece Bathrooms website, and is being used in Reece Bathrooms showrooms across the country. Trout creative director Anthony Bologna said:

Launching Imagin3D in the 25th year of our partnership with Reece is a huge accomplishment and Sherpa was the perfect partner to bring this to life. Creative collaboration across agency, client and supplier teams really open doors for businesses to engage customers by creating better brand experiences.

Sherpa producer Elizabeth Malcher said:

It was such a pleasure working with the teams at Trout and Reece on our third collaborative campaign this year. We were able to do a creative production deep dive and get to the heart of their messaging.

Construction materials manufacturer Knauf Gypsum (Knauf) has released Stratopanel, a perforated plasterboard interior solution that helps to improve indoor air quality in commonly used spaces.

Stratopanel is a perforated plasterboard lining that offers acoustic performances of up to NRC 0.80, providing high-level noise absorption treatment for internal walls and ceilings. It also features CLEANEO, an air-purifying technology that utilises dehydrated zeolite to reduce smells and airborne pollutants.

Zeolite is a natural volcanic rock containing porous minerals with high absorbency and ion-exchange capacity, enabling Stratopanel to purify air that streams through its perforated surface, removing unpleasant pollutants and helping to improve indoor air quality.

Knauf R&D engineering services director Thanh Huynh said Stratopanel is an ideal solution for commercial indoor spaces.

Stratopanel design options combined with noise absorption capabilities make it perfect for a wide range of commercial projects in buildings where we spend a lot of time working, learning, and socialising such as educational institutions, hospitals, retail spaces, offices, conference halls, and hospitality venues.

The Knauf Stratopanel system is designed to reduce noise reverberation in internal spaces and is available in several perforation patterns for a range of different project design and acoustic needs.

Stratopanel is also sustainable in its material composition, manufacture, and installation. It has been independently tested to confirm compliance with Green Star specification limits for VOCs (Volatile Organic Compounds) and formaldehyde (refer to report CETEC V2111). It is manufactured from a combination of low embodied energy, non-toxic natural gypsum, and liner paper.

Stratopanel can be installed with a cap screw system which makes the panels demountable and able to be repurposed, minimising unnecessary construction waste.

An innovation for both linings contractors and specifiers, Stratopanel perforated plasterboard features the unique UFF edge profile. The UFF profile ensures alignment of continuous perforation patterns and, when installed with Uniflott jointing compound forms a seamless, tapeless joint.

The Australian Bureau of Statistics has released retail revenue statistics through to July 2022. In surveying these stats, HNN is using the trailing 12 months to July, which we refer to as "periods" (p). Thus p2019 runs from August 2018 to July 2020.

Australia

Looking at the stats for Australia overall, total sales for p2022 amounted to $25.2 billion, up by 6.7% on the previous corresponding period (pcp), which was p2021. South Australia (SA) had the strongest growth at 17.9%, an increase of $246 million on the pcp. Western Australia (WA) had growth of 9.5%, up $227 million on the pcp, and New South Wales (NSW) had growth of 7.8%, with an increase of $558 million.

Victoria (VIC) had the lowest growth rate, at 1.7%, an increase of $111 million.

Looking at the comparative monthly numbers for Australia in Chart 2, it is evident that there has been a tempering of growth for April through July in p2022, though this echoes the same pattern for p2021. Growth has remained consistently high, at close to 10% since February 2022.

New South Wales

Retail revenues for NSW continue to climb. While the rate of growth is lower than for p2020, the revenue has exceeded p2021 since September 2021. Growth rates have actually picked up since the start of interest rate increases in May 2022.

Victoria

With the lowest growth rate for p2022, VIC's chart looks quite different from the other states. Revenues for p2022 have tracked fairly closely to those for p2021, except for an extra boost in February 2022.

As the graph for percentage shows, growth is tracking close to pre-pandemic levels of growth, essentially splitting the difference between the high levels of growth in p2020, and the retreat from those levels in p2021.

Queensland

As with NSW, Queensland (QLD) shows a positive boost to revenue, with increases beginning in March 2022. There may be some influence from interest rates in that July 2022 is essentially flat with June 2022, while previous years typically show a tick upwards for the month.

South Australia

SA has seen very strong growth since April 2022, tracking to a high of 45% for July 2022. This is partly due to a strong did during these months for p2021. Nonetheless, overall revenue has set new highs for every month of p2022 except May 2022.

Western Australia

WA has set records for its hardware retail revenues for every month in p2022 except May 2022, where it was narrowly below revenue for May 2020. Growth for p2022 has been consistently around 10%.

Australian Capital Territory

The Australian Capital Territory (ACT) achieved new revenue highs from November 2021 through to April 2022. However, overall growth has moderated since April 2022 to be below 10%.

Analysis

While it is true that we continue to see relatively high revenues, especially for the first seven months of calendar 2022, the impact of inflation has to be considered as well. If that does represent over 7%, then growth rates would be close to those of previous years. That inflation consideration also raises concerns with hardware retail in VIC, as its growth rate would then be negative since March 2022.

In general terms, the hardware industry is seeing what has been forecast, which continued demand, both from builders working through a backlog of projects, and from homeowners continuing to spend on their houses.

The video footage, available through news.com.au, is highly confronting. Two men crouch on either side of another man held prone on the ground.

Both the prone man's arms are held behind his back, one by each of the other men, as he screams, "I can't breathe! Help! I can't breathe!"

That took place around 11:00am on a Monday morning, 12 September 2016. (We note that this was three and a half years before the murder of George Floyd by police in the US, which renewed the efforts of the Black Lives Matter movement.) The location of the event was the Bunnings Warehouse store in Frankston, Victoria.

The man being restrained was Anthony James Georgiou (friends called him "AJ"), a 31-year-old former bricklayer. The two men who restrained him were Abdul Brenzai and George Oyee. They were employed through an outside contractor as "covert operatives" to prevent loss through store theft in that Bunnings store.

Police arrived at 11:12am. Mr Georgiou reported being "sore all over" his body, and the police called for an ambulance. Some 33 minutes later, at 11:45, Mr Georgiou was being triaged at Frankston hospital. The police spoke to him at 3:30pm that day. He died later in the day, though the exact time of death is not recorded in the coroner's report.

The causative event behind Mr Georgiou's detention right before his death? Mr Brenzai and Mr Oyee believed Mr Georgiou had attempted to steal a saw blade.

Obviously, that's not an outcome anyone wanted, including Mr Brenzai and Mr Oyee - as well as Bunnings itself. The medical forensics indicated what a specialist forensic pathologist called a "perfect storm" of medical conditions contributing to the death of Mr Georgiou. However this was paralleled - according to the coroner's report - by a process that seems to have nearly negated the series of safeguards Bunnings had attempted to put in place on the behaviour of its "covert operatives".

For those of us who spent some time during Melbourne's initial long COVID-19 lockdowns watching the public state inquiry into the failures of the quarantine system, all this has a familiar echo. The Victorian Department of Health employed security guards to manage quarantine, as Victoria police refused participation. The result was undisciplined chaos. Who can forget, for example, the security guard who was placed in quarantine after exposure, got bored, and took up a job delivering takeaway food to households during his isolation period? As a workforce, they were utterly unsuited to their task.

In a somewhat similar outcome, the coroner did not see any of the matters discussed below as being directly contributive to the highly unfortunate and very sad death of Mr Georgiou. Perhaps the most essential of his statements is this:

Mr Brenzai and Mr Oyee gave evidence that they acted in self-defence. On the basis of the material before me I am unable to gainsay these assertions.

That said, HNN still thinks it is worth pursuing this matter at some length. The reason for this is that there is an ongoing dispute, argument and, hopefully, discussion about hardware retail and the form it should take.

Independent hardware retailers believe that to operate this form of retail successfully requires a depth of knowledge that exceeds that of other forms of retail. There is just too much at stake to do otherwise.

Bunnings and other corporates tend to disagree. They believe that codes of practice, training, safe systems and good management can work just as well.

There is much to be said on both sides, but HNN would suggest that the set of events surrounding the death of Mr Georgiou really does illustrate the limits to the Bunnings-style model. That's not because Bunnings was careless, or ill-prepared for what happened. On the contrary, the big-box retailer had Codes of Conduct and a training day for the employees engaged in "covert operations" around loss control.

The most important thing the coroner has to say is that he is not convinced that even if Mr Brenzai and Mr Oyee had signed the Code of Conduct, attended the training day, and understood what was required in terms of avoiding physical engagement, that this would have made much difference.

The reality is that probably Mr Brenzai and Mr Oyee should never have been put in the position they were in, not just as loss prevention staff, but also operating covertly. What was needed wasn't a set of guidelines, it was experience, and a real "feel" for the retail environment.

Basically, if you actually have to tell a staff member "don't get into a brawl with a customer under any circumstances", then you've already made a mistake. Nobody in independent retail has a rule book that begins with Rule No. 1 "Don't punch the customers."

The simple truth is that not everyone is cut out to work in retail, and that applies double to home improvement retail.

The coroner's report

Nearly six years after the event, the Victorian Coroners Court has released its findings. (That's not an uncommon delay for the Court, which has suffered a severe backlog for some time.)

The end finding of that report is as follows:

However, the coroner also acknowledges that there may be more to this death than a medical condition:

66. Dr Brouwer's report sets out that medical cause of death and further explains the role of the struggle between Mr Georgiou and Messrs Brenzai and Oyee being at least a cause of the manifestation of the conditions which led to Mr Georgiou's death. That is, there seems little doubt that had Mr Georgiou not been involved in the struggle with Messrs Brenzai and Oyee he would have walked away from Bunnings that day.

67. Submissions made on behalf of Bunnings support this conclusion.

68. Such a conclusion is not a statement that anyone is, or may be guilty of a criminal offence, nor is it a determination of civil liability but it 'points up' the most significant issue in the Inquest - how the struggle involving Messrs Brenzai, Oyee and Mr Georgiou could have been avoided.

That finding largely repeats the statement made by Dr H. Bouwer, a specialist forensic pathologist practising at the Victorian Institute of Forensic Medicine. In more detail, Dr Bouwer's report stated that the Mr Georgiou's death was triggered by electrolyte imbalance leading to rhabdomyolysis, which, as explained by Dr Bouwer, is:

...the break-down of cells which can occur after a violent, physical, activity or a struggle the effects of which can be complicated by methylamphetamines.

Dr Bouwer explained that in the setting of physical exercise or strenuous activity the heart rate and blood pressure go up, adrenaline and noradrenaline are released causing stress on the heart. Methamphetamine increases the release of adrenaline and noradrenaline creating more stress and has a direct effect on the heart muscle.

However, Dr Bouwer also left open the possibility that other injuries may have contributed to Mr Georgiou's death. In particular, he noted an unusual pattern of fractures in Mr Georgiou's thyroid area.

Dr Bouwer described his examination of Mr Georgiou's body revealed bilateral superior thyroid horn fractures associated with haemorrhage, facial suffusion, bilateral conjunctival petechiae which he said is usually caused by pressure applied to the 'Adams Apple' area of the throat. Whilst Dr Brouwer was unable to describe how much pressure would have been necessary to cause the fractures to which he referred, he explained that in younger people, such as Mr Georgiou, the structures are more cartilaginous than in older people where they are more ossified and in younger people more pressure would be required to cause such fractures.

Dr Bouwer commented that these injuries did not appear to be immediately fatal because the deceased spoke to police after Dr Bouwer thought that they occurred. Dr Bouwer gave evidence that if these injuries inhibited breathing, then they may have contributed to the cascade of events which resulted in Mr Georgiou's death. That is, a headlock, depending on how it was applied, may have caused the injuries, and if a headlock did cause the injuries and restricted Mr Georgiou's ability to breath, that this too may have contributed to the cascade that caused his death.

This takes us to the description of the actual encounter between the "covert operatives" and Mr Georgiou. With the benefit of some CCTV footage (though the area where the scuffle occurred had only indirect coverage) the coroner was able to construct a step-by-step scenario. It goes like this:

Testimony of the covert operatives

Mr Brenzai and Mr Oyee were employed by security firm New Security Solutions (NSS), originally through a subcontracting arrangement with a man named Ali Haidar. In June 2016, the two men began working for NSS directly, an arrangement which was "formalised" in September 2016, but it's left less than clear exactly when that happened. Interestingly, when asked about his employment with Mr Haider by the coroner:

Mr Brenzai said that he couldn't remember when he started work with or for Mr Haider or how Mr Haider paid him.

It's perhaps helpful to add this rather short but pithy remark made by the coroner in the summation paragraphs of his report.

Despite their best-efforts police have not been able to locate Mr Haidar.

The three key points that were brought up by the coroner were: could Mr Oyee and Mr Brenzai have de-escalated the conflict; if they signed a copy of the Bunnings Covert Operative Instructions Code of Conduct and were therefore responsible for its content; and if they attended a training course held by Bunnings at its Melbourne head office for covert operatives on 19 August 2015.

De-escalation

When the coroner asked Mr Oyee why the two men didn't just step away from Mr Georgiou, Mr Oyee replied he didn't want to turn his back on the former brickie. The coroner pointed out that he could have stepped back without turning his back.

Coroner: So, you could've stepped away from him while you were looking at him. Is that right?

Mr Oyee: That's right. But the whole issue, your Honour, I wanted to prevent the product off him. I wanted to get the stuff off him.

Coroner: Get the stuff off him?

Mr Oyee: And wanted to take him up to upstairs to get the paperwork.

Coroner: To get the paperwork?

Mr Oyee: At the end of the week, you have to do the report to, ah, to NSS.

In a slightly inchoate statement, Mr Brenzai declared that he did not simply let Mr Georgiou go because:

We feared for our own safety with this gas bottle.

This was despite Mr Oyee removing the gas bottle during the first minute of the attempted "arrest".

Code of Conduct

According to the coroner's report:

Mr Oyee was shown the Bunnings Covert Operative Instructions Code of Conduct. Mr Oyee gave evidence that his signature was on the copy of this document at p.168 of the Inquest Brief but that he didn't remember signing any such document and that the document didn't look familiar to him.

When shown a copy of the document, the testimony went like this:

Coroner: And that's a document you signed? Is that right?

Mr Oyee: Yes, Your Honour. I haven't directly signed.

Coroner: I beg your pardon?

Mr Oyee: I haven't directly signed.

Coroner: Is that your signature?

Mr Oyee: It looks like my signature, but I have a doubt.

Coroner: I'm sorry, I don't understand?

Mr Oyee: It doesn't look like my signature.

It goes on like that.

As the coroner sums up the exchange:

Mr Oyee gave evidence that he had never seen the document at page 306 before and that it wasn't his signature at the bottom and that nobody from Bunnings had told him not to engage in arguments with a customer or physically restrain an offender except in self-defence.

Mr Brenzai related a similar account, according to the coroner.

46. Mr Brenzai was shown a document "Code of Conduct", attached to AM7, the same type of document that Mr Oyee was shown, this version of it ostensibly contained his, Mr Brenzai's signature. The Code of Conduct sets out Bunnings' expectations and instructions to 'convert operatives', that is 'plain clothes' security guards working at the stores looking for 'shoplifters' as Messrs Brenzai and Oyee were on 12 September 2016.

47. Mr Brenzai gave evidence that the writing on the document was not his handwriting and that the signature was not his. He explained that points 1 - 4 of the document had been explained to him verbally by Mr Naffah, a then employee of New Security Solutions, his then employer although he could not remember when. Mr Brenzai gave evidence that he had never seen the "Code of Conduct" document at page 165 of the Inquest Brief, allegedly bearing his signature. Mr Brenzai gave evidence that nobody had given him any documents or instructions about how he was to perform his role other Mr Naffah explaining to him points 1 - 4.

The importance of these signatures is laid out by the coroner, as he quotes these two key instructions from the document:

7. Never attempt an apprehension unless I am 100% certain that the offender has stolen.

8. Never engage in an argument of any kind with a customer or physically restrain an offender except in self-defence.

The signatures were, of course, witnessed - but by Mr Haidar, who, as mentioned above, seems to have become somewhat unavailable. This meant the coroner could not make a final determination on these matters. As he reported:

It is regrettable that Mr Haider could not be located - I can take this matter no further absent further evidence.

However, in summing up his findings about this area, the coroner states:

Even if the document had been signed by Messrs Brenzai and Oyee, and they had read Bunnings Covert Instructions I could not say with any degree of surety that what occurred, would not have. It is of course possible that having read those documents Messrs Brenzai and Oyee would have acted differently but on the basis of the evidence I cannot say with any confidence that this would certainly have been so.

He goes on to comment:

I am unable to be critical of Mr Brenzai or Mr Oyee for breaching the Bunnings Code of Conduct - and I am not. Their evidence is that they were simply not aware of it. As I have referred to above, even had they been, as the evidence currently stands, I am not clear that such knowledge would have made any difference to what happened.

August training course

While Bunnings might have held a training course for its "covert operatives" in August 2015, it seems this was not that memorable an event. Mr Brenzai has some recollection of attending something at Bunnings somewhere around that time, but he could not recall any of the content.

When asked about whether he recalled attending any covert operative training conducted by Bunnings, Mr Brenzai said that he had attend a meeting in the Bunnings Head Office for which was late. He initially thought that he had attended after lunch although he could not precisely remember. He said that he thought that he attended this meeting while he was working for Mr Haidar and that he, Mr Brenzai was late - he didn't remember if he went back after lunch. He conceded that it may have been August 2015. Mr Brenzai was taken to the PowerPoint slides at pages 281-304 of the Inquest Brief and told that these were presented to students at the covert operative training in August 2015 and asked if the slides or their content were familiar to him. He responded that he didn't remember.

Mr Oyee seems to have drawn a similar kind of blank regarding the Bunnings training, according to the coroner:

Mr Oyee was also shown PowerPoint presentation slides said to have been used at a Bunnings training course conducted on 19 August 2015 for covert operatives in Bunnings Stores.

Mr Oyee gave evidence that he could not remember if he had attended that training session and that the slides didn't look familiar to him. Mr Oyee gave evidence that he didn't recall going to any meetings of security staff or being provided any training at all by Bunnings.

In the summation paragraphs, the coroner states:

Mr MacDonald, the then National Investigations Security Manager for Bunnings gave evidence that Bunnings had no evidence that Mr Brenzai or Mr Oyee attended the training session on 19 August 2015.

It's unclear whether attendance was taken, but the two "covert operatives" did not sign in, or if no efforts to record attendance were made.

However, again, the coroner does not believe that attendance or non-attendance were determinative:

There seems to be no controversy that Messrs Brenzai and Oyee didn't complete a full day's training on 19 August 2015. There is however insufficient evidence for me to conclude that if such training had occurred that Mr Georgiou would not have died as he did.

Analysis

Just about everyone in hardware retail - including suppliers - who reads this story is probably as much puzzled as horrified by these events. That is just not how you do loss prevention. Really.

Why didn't the "covert operatives" simply calmly confront Mr Georgiou immediately after he made his other purchases, and say something like - pleasantly but firmly - "Mate, I reckon you might have forgotten to pay for the saw blade in your pocket, right?" That would have made the point, retrieved the allegedly stolen property, and burned up as few resources as possible.

Or, later, after Mr Georgiou was confronted and offered to give the saw blade back, but refused to return to the store, why didn't Mr Brenzai and Mr Oyee simply accept that offer, and cut their losses? By all accounts, whatever his concealed ailments, he was, well, built like a brickie - a really big, solid guy. Plus, of course, he was under the influence of methylamphetamines. Most retailers know when they are dealing with a drug-addled customer.

Every single independent retailer knows how to de-escalate and deal with that situation. You don't need to hurt anyone physically, when you can publicly shame or poke fun at the perpetrator. Often you just wait until the next time they visit the store - or try to.

The odd thing is that HNN has been witness to just exactly this type of good judgement by Bunnings staff in the past. We've seen some young kid (probably a poor apprentice) get stopped on the way out of the Hawthorn Bunnings, and take to his heels, closely chased by a staff member - who was called back immediately by a manager.

Afterwards, the manager and the staff member had a very quiet chat. The manager pointed out, very seriously, that the staff were under no circumstances to place themselves in that kind of danger, adding that they were also endangering the customer. As the manager said, very clearly, "It's never worth it".

This also brings to mind, of course, the recent controversy about Bunnings using facial recognition over its CCTV systems to track loss prevention. As HNN wrote at the time, looking at the protections Bunnings has in place, these all seemed very reasonable, and almost a draft for future regulations. But are the assurances the company gives us about how it handles privacy going to result in better outcomes? Are they realised in place, or are they regulations that are seldom followed in a practical sense? The death of Mr Georgiou goes to how much confidence the public can place is guarantees issued by Bunnings.

But beyond these abstractions, there is a single truth here. There is now an eight year-old Melbourne girl who has to grow up without AJ, her Dad. There's no way to ever make that really right.

It would be good if everyone in our industry can just try to make sure this doesn't happen again. We can start by respecting expertise, training and experience, rather than just taking the cheap option.

The Mitre 10 store in Gympie (QLD) that is part of the Sunshine Mitre 10 network recently celebrated its tenth birthday. Its team of more than 40 employees had some fun with local customers from the Gympie community.

Marketing operations manager Nick Brindt said the store's success comes down to several factors. He told Gympie Today:

It's a culmination of many things to be honest, the quality of our staff and their experience, being invested in helping grow and support not only the Gympie community, but surrounding region whether that be through sponsorships, donations, major local events, school groups or something simple like carrying a heavy product and loading it into a customer's vehicle.

Over the past decade, there have been some memorable moments and colourful characters. For Mr Brindt, it was the fortitude he witnessed first-hand during the floods. He said:

The resilience of this great community and banding together of people to recover from multiple flood devastations, and knowing we play a very small part in helping rebuild Gympie and the surrounding region - it's humbling.

In that time, they also get to know their customers. Mr Brindt said:

All our customers brighten our day. We have a very loyal trade base of builders who love turning up at 6am in the cold for a barbecue brekkie...

And we have our regular DIY customers that visit our nursery every week to talk with Glenda our garden expert. We are blessed to have such a genuine and loyal customer base.

Like many hardware stores, the team at Sunshine Mitre 10 Gympie are generous with the various sponsorships, donations and fundraising events they get involved in in the community. Mr Brindt said:

To be honest, there are too many groups to list. We do our best to support as many groups throughout the region, and believe that we play an important role in supporting these groups, as these group are the life blood in regional locations.

We also believe it's so important to develop, support and grow the next generation. And with the recent floods of 2022, we donated $40,000 in building materials between various community groups, and local families.

At the end of the day, that's what the business is all about, according to Mr Brindt.

The most enjoyable part is knowing that we play a pivotal role in the Gympie community, and knowing a lot of our customers on a first name basis.

If you were to ask all our staff, they would say our customers are the best part.

Petries Mitre 10 Dubbo

Brad Petrie, manager of Petrie's Mitre 10 Dubbo is keen to know what people are thinking about the new trade facility after the team put a lot of effort into preparing it for opening. He told Dubbo Photo News:

The shop has been opened all month and it has been going really well.

Petrie's Mitre 10 Trade Centre Dubbo is located at 62 Fitzroy Street, Dubbo (NSW).

Mr Petrie and the team also paid tribute to Malcolm Petrie who sadly passed away aged 90 in late August, on the day of the Dubbo trade centre launch. Mitre 10 staff formed guard of honour for their colleague as the hearse passed by Mudgee's Mitre 10, according to the Mudgee Guardian and Gulgong Advertiser.

There have been ongoing tributes from local and business communities around Mudgee and the Central West for Malcolm since his passing. Malcolm's daughter Annette remembered her father as a kind and generous man. She told the Mudgee Guardian:

His kindness, strong intellect, love of people, sense of fairness, humor, shone through in whatever he did. He connected with people; he saw the best in people.

She said the outpouring of love for her father has been overwhelming.

...The respect shown from our local community and beyond has been incredible. The beautiful comments on Facebook, the caring, respectful words from people we would meet in the street, the phone calls, the flowers. It has been unbelievable. We knew our father as a wonderful presence in our family and we also knew what a friendly, well-known man he was in our community.

Dad never sought acknowledgment of who he was or what he did, he was just a good man. The past few weeks and the response to dad's death has shone a light on that fact, that he was a good man, a good friend, a respected member of our community.

The hardware store carrying his namesake, opened in Mudgee in October 1986. Liam Collier, business development manager at the Independent Hardware Group remembered Malcolm as a titan of the industry and a great bloke. He said:

Mal had many years serving on Advisory Councils. He quite enjoyed seeing the workings of Mitre 10 and the responsibility of setting direction for the brand. He even represented the brand on TV commercials when Paul Cronin was the Mitre 10 frontman, and was generally recognised as one of the faces of Mitre 10 NSW ... Mal gave his guidance, his mentorship and his cooperation towards other Mitre 10 members and suppliers...

He will be sadly missed by the Mitre 10 families across Australia, but we are very grateful for the time he gave to our brand, and the amazing family that remains to continue his work.

Related

As the new chief executive at James Hardie, Aaron Erter will be based at the company's Chicago offices in the US. In a statement, Mr Erter said he had "long admired" James Hardie and jumped at the chance to join the firm.

I have been fortunate to work for some world-class organisations in my career, and I am confident that my experience and expertise align with what James Hardie needs in a leader.

James Hardie recently implemented pushed another raft of price rises through its business, which is expected to affect customers in the Asia-Pacific region in September.

Mr Erter said the company was in a "solid financial position".

...The relentless pursuit of providing solutions to the trade and offering materials that help beautify and protect homes will continue to grow under my leadership. These are qualities that have built the business into the leader it is today and will be our guiding principles as we move forward.

Mr Erter was most recently CEO of PLZ Corp, a North American group of companies involved in specialty aerosol and liquid product manufacturing. PLZ is owned by Pritzker Private Capital and management.

Mr. Erter joined PLZ from the Sherwin Williams Company, where he was president of its Performance Coatings Group. Prior to this, he held various senior roles at Valspar which was acquired by Sherwin Williams in 2017, and Stanley Black & Decker, where he was instrumental in expanding the company's distribution channels.

Mr Erter was appointed after a comprehensive search conducted by Heidrick & Struggles, following the sacking of previous CEO Jack Truong after James Hardie described the work environment under him as "too hostile".

In The Australian Financial Review (AFR), it was reported that the first several weeks was spent working out what qualities the new boss needed, with discussions held with employees and with the board.

The board felt its strategy (much of which was set under Mr Truong) was the appropriate one, so it was not a job for a CEO who would turn the company on its head.

Instead they decided four key criteria: a leader who had experience running global operations; someone who could bring teams together across a large organisation; a leader who could take consumer data and insights and turn it into products that would generate demand; and a leader with strong emotional intelligence.

James Hardie's incoming chairwoman, Anne Lloyd believes the type of manager needed to lead an industrial business has changed - the drill sergeant-type CEO or coach doesn't work any more. She told the AFR:

Hardies is a tough place to work, everybody demands a lot of one another. I love that. But it's how you do the demanding that has changed.

It was clear that we needed a leader that had a strong EQ, someone who could identify and develop talent, and who could couple empowerment with accountability.

At the announcement of Mr Eter's appointment, Ms Lloyd said:

Aaron brings experience leading global teams and the ability to execute strategies that combine innovation, marketing to the homeowner and penetrating new and existing markets and segments.

Aaron has proven capability and extensive experience in understanding the consumers' needs, commercialising the right innovative products to meet those needs, and driving growth through the right consumer marketing.

Mr Erter will take over from interim CEO Harold Wiens.

Related

Mr Erter's appointment comes eight months after James Hardie sacked its previous CEO Jack Truong.

James Hardie said that it had missed earnings expectations and cut guidance in its first-quarter results.

Plantation timber

A $1.2 million Victorian Forestry Plan innovation grant will allow Australian Sustainable Hardwoods (ASH) to expand its plantation timber manufacturing.

Minister for Agriculture Gayle Tierney visited the Heyfield mill to announce the innovation funding and inspect the mill's newest addition - a retail outlet also funded by the Andrews Labor Government.

The new funding will help build a new $2.4 million specialised MASSLAM (Glue Laminated Timber) manufacturing facility to support the mill's transition to alternative fibre sources.

ASH is the only large-scale manufacturer of MASSLAM in Australia and this investment will help them expand their current operations to manufacture products made out from plantation shining gum.

The grant will support the build of the specialised MASSLAM manufacturing facility which will create 12 new full-time jobs and help retain the mill's existing 172 roles.

The investment will also help future proof ASH's manufacturing business. The facility will be able to manufacture more products from plantation timber in the future such as mass flooring systems, engineered floorboards, kitchen benchtops and components for staircases, windows, doors and furniture.

The mill previously received $1.6 million through the Victorian Timber Innovation Fund to install a new manufacturing line to produce engineered flooring made from plantation shining gum and Australian made pine plywood and to expand both its online and retail outlet.

The retail space has recently been completed and customers can purchase staircase and furniture components directly from ASH. The engineered floorboard line is anticipated to be up and running by the end of the year, and ASH will become the only company in the country to manufacture this kind of high-value plantation product.

The Victorian Timber Innovation Fund is a key part of the Victorian Forestry Plan supporting timber businesses to diversify and plan for their future. ASH managing director Vince Hurley said:

Plantation shining gum is a key pillar in the future of MASSLAM production. This investment will mean that ASH can continue to produce Australian made large-scale section columns and beams.

To paraphrase an advertising slogan, sometimes economies ain't just economies. The big surprise of 2022 has been that one of the previous strengths of the globalised economy - the reduction of short-term localised shortages of essential supplies - has diminished considerably.

Nowhere in the global economy has this been felt quite so severely as in building and construction supplies. After a brief hiatus at the start of the COVID-19 pandemic, the number of building projects increased dramatically in Australia and elsewhere, despite the difficulties imposed by pandemic restrictions.

While many have sought to criticise central banks such as Australia's Reserve Bank of Australia (RBA) for a lack of foresight which contributed to rising rates of inflation, the reality is that the combination of economies stressed by a pandemic, high demand and poorly performing supply-chains is something not seen in any developed economy since the 1940s.

Much attention has been focused on immediate causes of these shortages, but the shortages take place in the context of a changing global economy. The biggest clue to what is really happening can be seen in what is likely the most important shortage of all - that for silicon chips required in many manufactured items, from power drills to dishwashers to every single automobile manufactured today.

The fact is that value in many economies has moved away from the material nature of "things", and into the abstract value of software and networks. Mobile phones might seem a popular product to purchase, but what's really being "bought" is various forms of connectivity and the utility of being able to do things virtually rather than in a physical form.

What this has led to is a persistent disinvestment in more material business processes. In a different global economy, such as that of the 1990s, the shortage of shipping, for example, would have been met by a ramping up of supply chain resources. In today's economy, with longer term forecasts indicating, at best, very slow ongoing growth in shipping, potential investors do not see the potential for good returns.

Housing remains physical

The one outstanding exception to the move from the physical to the virtual is housing. Physical cars can be replaced both by virtual communications - work from home eliminates the commute, online ordering eliminates Saturday shopping - and better utilisation of public transportation, ride-sharing, and even eBikes. There is, however, no virtual replacement for a bedroom and a bed to sleep in.

What will happen eventually, over the next five to six years, is that the demand "bulge" created by the pandemic will be processed, COVID-19 will cease to place limits on Chinese economic activity, and there will be an ongoing decline in many manufactured goods - likely in the direction of fewer but better. This will result in more capacity for building and construction supplies, as well as shift of manufacturing capacity to that area as demand elsewhere decreases.

Ongoing high costs

Meanwhile, of course, the Australian construction industry continues to look down the barrel of ongoing shortages and higher costs, without a definite turning point in sight.

Timber is a particularly worrying element of all this. In a recent article in The Conversation, Flavio Macau, associate dean at the Edith Cowan University School of Business and Law, outlined the decline in timber availability in Australia. He quotes from an Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) report which indicates declining availability of both hardwood and softwood products.

There is a litany of shortage problems described by Prof. Macau:

In the 2019-20 bushfires, 130,000 hectares of plantation forest were burned. Recent floods didn't help.

Native forest harvesting is also falling; it will be banned in Western Australia by 2024. Victoria will phase out the industry by 2030.

As he points out, the solution to this is to increase the importation of timber. But this comes with considerable costs:

Logs cannot be manufactured. They grow, and this takes about 20 years. The only way to go through current shortages is by importing or replacing timber.

Importing timber isn't cheap. Australia has very low costs to grow and harvest, less than half of major global exporters. Adding to that, international shipping rates have surged in the past two years.

For housing construction, one way out of this is to switch to steel framework. But this has also encountered supply and price problems. Prices have risen by over 40%, and Russia's invasion of Ukraine has led to further shortages, while additional duties imposed on Korean and Vietnamese steel have contributed to problems.

Prof. Macau does not see much hope for the future:

There is no indication timber prices will go down again, as they did in 2020. As for steel, 2013 was the last time there was a significant price reduction...

Will construction prices come down? One can only hope - but it's unlikely to happen anytime soon.

Eli Greenblat, writing in The Australian, has a less pessimistic outlook on, at least, the timber industry. As he reports:

Australia's construction industry sources as much as 20 per cent of its timber from overseas, and while it only makes up a minor proportion of all the lumber used domestically, industry experts believe that moderating prices for imported timber should flow through to prices for local timber too.

Mr Greenblat quotes the chairman of hardware buying group Natbuild, Mike Barry, as saying that:

Imported timber has traditionally been a higher cost than domestically sourced timber, and more recently it's been significantly higher. So yes, ultimately there will be some flow through to lower prices as imported timber prices moderate.

We are seeing a build-up in stock, holdings of timber, which would help supplies and lower prices. Timber companies now have increased comfort about access to supplies, so we are seeing that slowly being reduced.

Yet Mr Greenblat also points to the decline in Australian timber production, citing a report by the Australian Forest Products Association which indicates Australia's forestry plantation estate has shrunk by the equivalent of 76,000 house frames.

Analysis

It's a general rule of looking at timber forecasts that both despair and exuberance tend to be misguided. That's especially the case in a market where substitutions are expected to grow more common and to decrease in cost. The conservative note struck by the ABARES report "Global Outlook for Wood Markets to 2030" is probably closer to the emerging reality:

Based on ABARES modelling, Australian exports of roundwood are projected to decline by around 75% from 2020 to 2030 with logs redirected to the domestic market. Using 2019-20 values as the base year, the value of roundwood exports is expected to decline by $436 million or 74% over the period. However, the reduction in exports is due to substitution of logs away from international markets to domestic markets to meet growing domestic demand for roundwood. As such, the reduction in exports does not represent a loss. In fact, if global prices pass through to domestic prices (as assumed in this report) the value of logs harvested in Australia is expected to increase by 5.9% over the period.

In some ways we could look at this as a partial de-globalisation of the timber market in Australia. Exports decrease, while domestic consumption increases. It's a trend that could generalise as world markets come to be increasingly dominated by high-value, high-tech exports.

The Sydney Eastern City Planning Panel has given the go-ahead for a huge Bunnings store to be built in the suburb of Tempe, on the Princes Highway in Sydney's inner west.

It received approval with a local area traffic management plan (LATM) endorsed by the Inner West Council. However, the LATM was rejected and deferred by the same council's traffic committee due to a lack of traffic lights and a fear by residents that their narrow streets could turn into dangerous rat runs.

Now the planning panel has given the all-clear for the megastore to begin construction with the LATM endorsed. According to the Inner West Courier, the determination stated:

The panel is now satisfied that all relevant preconditions to consent have been satisfied and there is no reason that would warrant refusal of this modification application.

The Local Traffic Committee had deferred or failed to decide on the (Inner West) Council's Officer's recommendation to approve the independent study and its recommendations, and both the applicant and the community should be able to expect certainty and timeliness in the planning system.

The determination by the panel gives Bunnings permission to start construction. However some local community members said the outcome was "extremely disappointing". Local resident Jack Breen told the Inner West Courier:

This is extremely disappointing news for the Tempe community. Bunnings has successfully used their bulldozer approach to push their way through the NSW planning system to get approval to start their build - opting for the quickest way, rather than the safest way.

The one silver lining is that the need for a soft closure of Union Street from Smith Street has been agreed, although this is only addressing part of the challenges that remain about this problematic traffic plan for Bunnings Tempe.

Bunnings welcomed the determination. Chief property officer Andrew Marks said:

We welcome the Sydney Eastern City Planning Panel's decision to approve the LATM for the new Bunnings Tempe store, which we believe is the safest possible solution for local roads.

Bunnings Tempe represents an investment in the community of approximately $100 million dollars and will create around 200 new jobs for locals.

We look forward to being able to progress with the new Tempe store which will provide local residents with a wide range of home and lifestyle products, as well as ongoing local community support through hands-on projects, sausage sizzles and product donations.

Related

Tradie market

Bunnings managing director, Michael Schneider has told the Australian Financial Review (AFR) it will soon open two "dark stores" on the east coast to service Tool Kit Depot (TKD) online orders, with the first stand-alone retail store to open before the end of the year in Queensland. WA already has six stores that are focusing on product categories in the landscape garden market.

TKD is about landscaping power tools as a growth sector, expanding online before physical stores, and will include repair services. Mr Schneider said:

The Tool Kit Depot business is helping us cater to more of the specialist trade customers. We're able to deliver even more choice including an expansive power garden range used for landscaping, as well as an onsite service and repair offer.

According to the AFR, trade sales currently make up around 40% of sales but the goal is to reach 50% of sales compared to DIY.

The retailer has made big investments in online commerce and is also looking to make a push into more personalised digital communications to consumers and expand Bunnings' marketplace offering.

Wesfarmers-owned Bunnings will join the newly revamped membership program OnePass around November. Its stablemates Kmart, Target and marketplace Catch are already under this subscription umbrella.

Related

Bunnings has signed onto Flybuys as a loyalty program.

Bunnings FY2021/22 results.

Metcash recently issued a trading update just prior to its annual general meeting that showed sales are up by 8.9% across the group for the first months of the 2023 financial year.

It said that sales this year of the hardware business have increased 19.5%. Independent Hardware Group (IHG) posted same-store sales growth so far this year of 7.3%. IHG is also building a network of about 400 Mitre 10 and about 200 Home Hardware stores. Around 20 ThriftyLink/True Value stores have been converted to Home Hardware, and another 30 are planned for 2022-23.

There is a major focus on DIY categories such as kitchen/laundry/bathroom. The company said it is on track to build a network of about 130 Total Tools stores by 2025, and is targeting more upgrades and adding exclusive brands.

Hardware now makes up 20% of Metcash sales and 40% of profits. Inflation remained high, particularly in trade, although there were signs of easing as the availability of supply improved, said new chairman Peter Birtles.

Trade now represents 64% of the sales mix, up from 60% in FY21, with the remainder 36% in DIY.

Metcash said it wasn't yet clear if inflationary pressures would change shopping behaviours in the near future. Mr Birtles said:

A higher rate of inflation has also continued into the first half of [financial year 2023], and there is uncertainty over its level going forward and whether it and other cost of living increases will impact consumer behaviour in the retail networks of our pillars.

Delta Agribusiness

After expanding its network into South Australia, NSW-based farm services group, Delta Agribusiness, is believed to be seeking fresh financial backing to replace the private equity group, Odyssey, which bought a 24% stake in 2019.

Sources told the Street Talk in The Australian Financial Review that it is targeting private equity firms, private capital players and bigger retail groups.

The business is expected to be pitched as the third-biggest rural services supplier, behind Elders and Nutrien (which acquired Ruralco in 2019). It is understood to be making about $800 million a year in revenue and about $60 million in EBITDA.

The business describes itself as a leading force in rural inputs and advice in regional Australia, offering similar services to the larger Elders. Its five brands include Delta Ag, North West Ag Services, Agrivision Consultants, Aglink David Gray's, Cox Rural and ARH Agquire Rural Holdings.

Established in 2006, Delta's rural service platform also encompasses merchandise, agricultural chemicals, agronomy and precision agricultural technologies, animal health, seed and fertiliser finance and insurance. It operates grain marketing and farm consultancy services too.

Building supplies and housing group BGC is citing labour shortages and rising costs and its impact on residential construction in Western Australia for stopping the sale process. Supply chain disruptions and increasing interest rates are also being blamed.

According to the Street Talk in The Australian Financial Review, BGC's home building division has been hit by a severe market slowdown. Instead of taking six months to build a house, it's taking two years, and the unit's high fixed cost base means tough times for BGC.

DataRoom in The Australian understands that BGC's owners, the Buckeridge family, still want to sell the company in one line, but will wait for the right conditions to do so.

The announcement to stop the sale process comes four months after the BGC board put the group on the market for a second time in four years with the aim of distributing the proceeds among the late Len Buckeridge's heirs.

However, with the shortage of skilled trades in WA slowing down the home construction business, and likely hurting its value, BGC directors said, "now is not the time to be selling the group".

While BGC said it had received "very strong interest from a range of parties", it had postponed the sale after considering "current market conditions".

The board will revisit its decision in six to 12 months when the labour squeeze is expected to have eased. It said:

BGC is committed to a sale, and it remains BGC's preference to sell the group as a whole once these short-term challenges subside.

WA-based BGC's home building brands include HomeStart, Aussie Living Homes and Commodore Homes. In a statement, BGC chief executive Danny Cooper said:

We are not immune to the supply chain and labour challenges that are affecting all Australian builders. This means that now is not the right time to be selling the Group.

He added that builders were competing for the same skills such as bricklaying at the same point in the building cycle. In The West Australian, Mr Cooper said:

All WA builders are going through the same stage of building at the same time, given the timing of the start of the stimulus.

Moving from a market with 10,000 detached homes being built in WA to 25,000 plus with no mobility between borders, just doesn't compute, and we're all competing for the same groups of labour.

It just introduces challenges to the sale process, because any buyer looking at the business can see those challenges and risks in housing. It's unfortunate because the rest of the group is performing well.

Overall, it is understood that BGC had been generating $100 million of earnings before interest, tax, depreciation and amortisation and $1 billion of revenue. Earlier, it was expected to sell for about $1 billion, but recently some speculated a price of between $500 million and $700 million was more realistic.

Related

Jeld-Wen

Jeld-Wen's Australasian operation generates between $90 million and $100 million of earnings before interest, tax, depreciation and amortisation, according to DataRoom in The Australian.

Although Jeld-Wen holds the leading position in Australasia in its sector, the unit up for strategic review generates just 10% of its global revenues.

Sources told DataRoom that divesting the Australasian operation presents an opportunity for further investment that the global group has not pursued. A sale process for the business is expected to get underway before the end of the year.

The company said in a statement the review was consistent with its goal of simplifying its operations.

Prospective buyers include private equity firms, buyout funds and listed building materials providers such as CSR, Fletcher Building and GWA, while Dulux owner, Nippon Paint could also be interested.

Jeld-Wen currently employs about 5000 people in Australasia and comprises 41 manufacturing locations across Australia, Malaysia and Indonesia. It produces and distributes interior and exterior doors, and wood, vinyl and aluminium windows.

It also makes wall systems, shower enclosures, closet systems and other components used in construction, along with the repair and remodelling of homes and buildings. Among its brands are Corinthian, Stegbar and Breezway.

We've probably reached the point where presenting the Australian Bureau of Statistics (ABS) data for building approvals as a layer of years has reached the end of its utility. HNN adopted this form of graph because it was about the only way to make sense of the pandemic market, which defied previous assumptions about seasonality.

Its purpose in this series is to illustrate that, at least in terms of building approvals, the housing markets are near the end of the COVID-19 pandemic stimulus.

Of course, when we refer to "pandemic stimulus", we're not just referring to the drive that the pandemic itself created for people to move into houses that they owned. We're also referring to both the direct monetary stimulus supplied by the Reserve Bank of Australia (RBA) through lowering interest rates to historic lows, and the fiscal stimulus by the federal government, which included programs such as HomeBuilder and JobKeeper.

(As the Australian Bureau of Statistics has released these stats through to July 2022, we're basing the charts on 12-month periods ending in July, and refer to these as periods. The period from August 2020 through to July 2021 would be referred to as p2021, for example.)

House approvals

That return to something like "normality" is perhaps best illustrated by Chart 1, which shows the number of building approvals state-wide for the five largest states.

If we look at each of these graphs as they depict the most recent four months, April, May, June and July 2022, we can see that the RBA's increase in interest rates during those months is having the desired effect. While those rate rises only began in May, the RBA had signalled as early as March that it would be increasing rates, which affected the number of approvals.

For New South Wales (NSW), there is a steeper than usual fall for April 2022, followed by a rise for May which equals that for 2019 and 2020, then continued moderation through June and July, with the July number of approvals the lowest for that month in the most recent five-year period.

Victoria (VIC) shows a similar moderation, though that state also shows overall a low historical level of volatility for those months. Queensland (QLD) shows a distinct convergence back down to the levels of approvals for p2019 and p2020.

There is a slightly different picture for both Western Australia (WA) and South Australia (SA). For WA the number of approvals has trended down since December 2021, but still remains above the levels for p2018, p2019 and p2020. There is a similar pattern for SA, though where WA approvals dipped down further for July 2022, SA approvals have ticked upwards.

Non-house approvals

It has been generally accepted that over the past two and a half years, back to March 2020, the market for non-house dwellings, including terrace houses and apartments, has been in broad decline even as the market for houses surged. That was largely due to the effect of actual and prospective COVID-19 lockdowns, as it was thought to be considerably better to be confined to a house, with an outdoor area, than to an apartment.

However, if we look at Chart 2, which shows approvals for non-house dwellings in NSW, VIC and QLD, it's evident that if the market has not surged like that for houses, it has nonetheless remained lively throughout much of the pandemic period.

For NSW, while the numbers for p2022 are generally lower than for previous periods, there is still a great deal of volatility, with a high peak as recently as September 2021. VIC shows ongoing signs of a slight decline, but there is an ongoing pattern of periodic surges, with p2018 reaching new highs, a low p2019, then a surge during p2020 prior to March 2020.

Meanwhile, QLD is ultra-volatile, with peaks during 2021 that exceeded the peaks of p2018, and more recent peaks in p2022.

Equally, however, it does appear that the tightening of monetary policy might have a disproportionate effect on this sector. In particular, there is a subdued result for June 2022, and a distinct downturn for July 2022.

Regional building approvals

One of the significant trends that emerged during the pandemic was an increase in house approvals outside of the states' capital cities. Looking at the three most affected states, NSW, VIC and QLD, there has been a wide variance in the pattern of regional housing approvals.

NSW regional building approvals

While regional approvals did increase for NSW, they only exceeded the norm for a relatively brief period, from February 2021 through to August 2021, though they did peak again for February and March 2022. For the rest of the pandemic period, these approvals where within the ranges set during p2018 and p2019.

Chart 3 shows the number of approvals in the top graph, and the percentage change in approvals in the lower graph.

As the growth graph indicates, growth in these approvals has been subdued since December 2021, with an overall drift into negative growth, and a strong downtick for July 2022.

VIC regional building approvals

Of all the states and territories, VIC has the most defined "story" for growth in regional house building approvals. Chart 4 shows the original stats for the number of approvals in the top graph, and the percentage growth in the bottom graph.

There is a very distinct elevation in the approval numbers from September 2020 through to September 2021 - 13 months in all. From October 2021 onwards however, the numbers have returned to a level similar to that of the previous four years - except for a peak in March 2022.

The lower growth graph shows just how strong the growth trend was, peaking at 90% in March 2021, and how much of a correction p2022 has been, with growth trending negative to -30% for much of that period.

QLD regional building approvals

QLD follows closer to the trend for NSW than VIC. As chart 5 shows, the only really exceptional period for regional approvals was from March to May 2021, with most of the rest of the pandemic period trending under the regional approvals made for p2018.

As the lower, percentage change graph indicates, there were some strong year-on-year growth periods during p2021, but these were largely contributed to by quite low numbers for p2020. The graph also shows that for p2022 since September 2022 growth has largely been negative, as regional approval numbers converge back to pre-pandemic levels.

Analysis

There is a wide range of different forces at work on the building and construction sector at the moment. It's evident that actual demand remains quite high, but increased interest rates, and the subsequent effect on the housing market, has decreased the number of actual buyers on the market.

Equally, HNN would draw attention again to the problem we've been pointing to for much of this year, that having a heavy backlog of building projects is no guarantee those projects will be completed. There has been a number of articles in the mainstream press about builders struggling to complete contracts due to increased supply costs, which make those contracts less profitable.

It's worth pointing out that builders with those contracts won them by underbidding other builders, who might have had the wisdom to factor in increased supply costs. It's a simple fact that there are real consequences for just not being that great at the business you are working in.

One of the most interesting questions is whether we will see a full recovery in the non-house building market during 2023. This is largely a cultural issue. There are, of course, a great many cities in the world where the main form of housing is actually multi-unit dwellings - places such as New York, Paris, London, Madrid and San Francisco come to mind. Given that there is such a dire shortage of affordable accommodation, it would not be surprising if we start to see concessions being made by state governments to boost the building of more apartments.

Bunnings is set to close its Wollongong (NSW) store in January as the lease comes to an end next year, according to the Illawarra Mercury.

The store's last day of trade will be January 26, 2023 ahead of the lease expiring in March. Staff will be retained and redeployed at surrounding outlets.

Bunnings regional operations manager Robyn Hudson said the company's outlets in Bellambi and Kembla Grange offered customers a newer and expanded site. She told the Illawarra Mercury:

Because our lease expiry was nearing, and because North Wollongong is one of the older stores in our network, we've made the decision to close and service the local community from the nearby stores instead, rather than commit to a further lease term.

Bunnings opened on the current site in 1997 and the North Wollongong store is one of the oldest Bunnings in NSW. Ms Hudson said:

As our store portfolio evolves and new investments are made, we continually review our network and our needs in the local areas in which we operate. And while many of our stores play an important role for a long period of time, we continually reassess operations based on lease arrangements and store location.

The Wollongong location, which covers 27,320 square metres, delivers an annual rent of $1,501,165 to its owner BWP Trust and is currently valued at $26,100,000, according to BWP Trust's 2022 annual report.

Michael Wedgwood, managing director of BWP Management - the company that manages the properties on behalf of BWP Trust - said the business would assess what is next for the site.

We will undertake a detailed assessment of all potential uses to determine the best alternative for the site.

The property was originally purchased in 2003 for $12 million from BBC Hardware Limited which developed the site.

Bunnings thanked the staff at the North Wollongong store and said their work would be recognised in the coming months.

Tempe

The Eastern City Planning Panel in NSW is expected to hand down a ruling relating to the planned construction of a Bunnings store in the suburb of Tempe.

Bunnings has proposed changes to approved plans to allow construction to begin with the approval of a traffic management plan by the planning panel. The traffic plan was made in consultation with Inner West Council and an independent traffic consultant.

However the planning panel deferred a decision on Bunnings' proposed changes in March, to give time for council to notify residents of the company's amended development application.

The Inner West Council recently released its Traffic Signals Feasibility Study (TSFS). Its findings include road safety such as Transport for NSW 'Warrants', traffic signals and road delineation. Physical constraint suggestions include a heritage wall and an IKEA service driveway. Councillor Mat Howard told Inner West Independent (City Hub):

We have been pressuring Bunnings to improve traffic arrangements at their new Tempe store for close to a year...

We wrote to the Minister for Transport and Roads seeking approval for these traffic signals almost a year ago, to no avail. Our independent and new feasibility study is clear that traffic lights is the safest option and will have the least impact on our community.

The Minister for Metropolitan Roads and Transport for NSW owe it to our community to do their job, assess the feasibility study and confirm it is the safest option for our community. Bunnings should then do the right thing by the community they want to be a part of.

City Hub reached out to Bunnings for comment and a spokesperson said they "remain committed to achieving a safe and efficient outcome for local residents, inclusive of traffic calming measures to minimise any impacts."

The spokesperson for Bunnings also said:

However, we're yet to receive approval of the Local Area Traffic Management Plan (LATM), which is delaying the implementation of our development consent issued three years ago. We understand the unchanged LATM will now be put out for consultation again.

We continue to participate in the Sydney Eastern City Planning Panel process and are hopeful the matter can be resolved through the scheduled meeting on 1 September, so we can move the project forward and provide certainty to our contracted builder and hundreds of trades people who will be engaged to undertake the work.

Related

The battle against the proposed Tempe store is now in its sixth year.

Bosch Power Tools has announced the release of the seventh generation of its iconic light DIY power screwdriver the IXO.

The latest generation has reverted somewhat to the design style of Bosch's fifth generation IXO. While Bosch has made no comment on this matter, it seems likely that the sixth generation IXO, with slimmer, more modern lines reminiscent of pre-Techtronic Industries European AEG drills, was not quite a success with the loyal IXO fan base.

One indication of this is that the older IXOs have remained popular, and even sell for a price close to that of the more advanced new model.

Well, if you can't beat 'em, join 'em. The new model brings back the squatter style of the Gen 5, along with its brightly coloured trigger, and black and grey trim accents, while retaining the simplified switching between different custom use chucks.

However, while Bosch has retreated in terms of design, it has continued to improve the functionality of the IXO. The company claims it now has 20% more power, and produces 5.5Nm of torque. The battery runtime is also improved, and Bosch says it can screw in up to 190 screws for a single charge, up from 100 for the previous, Gen 6 model.

Bosch has also improved the sustainability of the popular tool. Its storage box is now 90% recycled plastic, and much of the IXO also uses recycled materials.

Analysis

The Gen 6 IXO turned what had been something of a "toy" screwdriver into a fundamentally more useful tool. In particular, it brought a speed-control trigger, which Bosch has retained for the Gen 7. The lift in power is really all about the additional attachments available for the IXO, which include a spice mill and wine bottle opener.

It's always a risk changing or updating a much-loved design. While HNN welcomed the change, it's evident many IXO fans actually want something that looks a little like a "raygun" from Star Trek. It does also open up the question if there isn't room in the market for a screwdriver with the aesthetics of the previous Gen 6 IXO, but offering closer to 8Nm of torque, for slightly more advanced jobs.

From October 2023, new residential builds must meet a 7-star energy efficiency rating - as opposed to the current minimum of 5.5 - which could mean adding solar panels to roofs, increasing insulation or converting gas hot water systems to a heat pump system.

The minimum 7-star energy rating requirement for newly built homes are part of the agreed changes to the National Construction Code that experts say will cut home energy bills.

While the 7-star standard focuses on the building shell, a separate change will also recognise the inclusion of energy-efficient appliances.

There is no checklist of features to create a seven-star home and the requirements can vary based on whether it is in a cool climate, and needs heating, or a hot climate, and needs cooling.

Instead, a new home's design is run through computer software that assigns it a rating from 0, a tent, to 10, a home so comfortable in all seasons that the occupants might not need to use heating or cooling. A 7-star home needs about 25 to 30% less energy consumption for heating and cooling than a 6-star home.

The new code was expected to reduce emissions by 1.64 million tonnes and would assist in Australia reaching its goal of net zero by 2050.

Under the changes, new homes would also need to be built to a "silver standard" of accessibility. This means, in addition to at least one step-free entry into the home, increasing the width of internal walkways to fit a wheelchair or walking frame, and a toilet on the entry level.

Master Builders Queensland CEO Paul Bidwell has been critical of the time frame. He believes it would place additional strain on an industry already struggling with a 30% increase in supply costs, and a pipeline of work beginning to slow. He said:

It's breathtakingly stressful. [Builders] are going to have to change the way they do their business.

October 2023 is not that far away and right now they're dealing with all sorts of other pressures. They just don't need that now.

The Property Council of Australia welcomed the decision to lift the energy efficiency standards, saying the changes to the construction code represented the first significant adjustment in a decade. Council chief executive Ken Morrison said:

It is great, that after years of work and advocacy on this matter, ministers have made the commitment to improve the efficiency of all new homes built in Australia.

Lifting the energy rating from 6 to 7 stars has the potential to slash the average household energy bill by up to $576 a year, so for homeowners and renters alike, a 7- star home means big savings, as well as higher levels of comfort.

Sustainable building expert Dr Trivess Moore, of RMIT (Royal Melbourne Institute of Technology), said the case for energy-efficient homes had existed for years but the property industry was reluctant to change.

The fact that standards haven't changed since 2012 is pretty poor, when you consider there are other jurisdictions around the world that require new houses to be net-zero. You don't even need to reinvent the wheel - we know what to be doing; it's just people have been choosing not to, and consumers don't understand.

Dr Moore said there would be a brief adjustment period for the construction industry - which could involve higher costs, additional training and education - but developers would adjust.

We have the skills and knowledge, the technology, design and materials, and examples of doing this at a much higher standard. The argument put forward by those in the industry, who don't want to see change, is consumers will choose a more efficient, effective, sustainable house if they value it. The problem is sustainable housing [can be] quite complex in terms of how to deliver it ... It's not as simple as solar panels.

Chatham Homes

Award-winning landscape designer and environmental advocate, Jamie Durie has been announced as Chatham Homes brand ambassador in a partnership focused on encouraging more sustainable, healthy and climate resilient homes.

Chatham Homes managing director Bradley Hall said Mr Durie's passion for sustainable design and living made him the perfect partner for Chatham.

Jamie Durie is an Australian design icon with more than 24 years of experience crafting spaces that not only improve the lives of those who live in them, but also the environment. This is also what drives Chatham Homes.

Mr Durie has more than 40 international design awards to his name and was awarded a Medal of the Order of Australia in 2013 in recognition of his commitment to and work in the environmental sector spanning 29 years. He said:

I was hugging trees long before climate change and sustainability were on the global radar. And I know there's never been a more important time to address a more sustainable way to live and build our homes.

The horticulturalist and author of 12 best-selling design books said he was thrilled to partner with his first home builder, and one that was creating healthier, more energy and cost-efficient homes at prices Australian families could afford.

The team at Chatham is doing an incredible job using the latest environmental technology and best quality practices to not only tread more lightly on the environment but to demystify the art of green building.

Together, we will challenge the industry and raise awareness for sustainable practices in home building for consumers. It's our shared goal that more Australian builders follow these green initiatives to build a better future for Australia.

Mr Hall said encouraging the home construction industry to do better to confront the challenges of living in a changing climate was also high on the partnership agenda. He hoped the partnership with Mr Durie would also raise awareness about the potential harms that existed within many homes.

Many people are unaware just how harmful issues like poor indoor air quality, the use of gas appliances and the presence of volatile organic compounds (VOCs) from paints, conventional flooring, carpets and cabinetry can be.

He said most new homes were not being built for maximum resilience against the impacts of climate change, with just 1.5% of new builds achieving a 7.5+ star energy efficiency rating under the Nationwide House Energy Rating Scheme (NatHERS).

Chatham Homes' Blackwood display home at Ballarat's Lucas estate has an 8.2 star energy rating, while its Arlington display home in the Attwell estate at Deanside, in Melbourne's west, has a 7.2 star rating.

Australians are spending around 30% more on home renovations than they were before the COVID-19 pandemic. The latest national homebuilding approval figures from the Australian Bureau of Statistics show that they spent just over $3 billion on home renovations during the June 2022 quarter.

In 2019, there was an average spend of around $700 million per month on home renovations whereas they are now spending $1 billion per month.

But when it comes to home improvements, some investments are translating into corresponding capital value increases on the property while others are not equating to a corresponding increase in home value.

Daniel McQuillan, managing director of property investment company Nu Wealth, said that since the onset of the pandemic, home renovations have become very popular as more people started to work from home. In Australian Property Investor magazine, he said:

In addition, more people have decided to use the disposal income they previously spent on overseas holidays to make their home more comfortable.

More people are also buying homes for renovation purposes and especially investors who are seeking to boost rental returns by upgrading old homes during a time of a shortage of rental properties throughout Australia.

With Australians effectively spending over $250 million each week on home renovations, it is critical not to over-capitalise, especially if you are a property investor.

Many first-time investors make the mistake of becoming emotionally attached to their properties and spend money that will not add any additional value to the property.

Based on the selling price of many homes, Nu Wealth found that a recovery percentage can be estimated for each renovation project. This can vary depending on the location of the property and quality of the renovations.

Not all renovations are equal and overcapitalising on a upgrades before a sale can be costly. McQuillan said:

The returns a home renovator can achieve on a renovation vary from location to location, depending on the capital values of the properties and the type of homes in highest demand in the area.

Reno suburbs

According to data from online tradie platform hipages, painters and cleaners are currently in the top 10 most in-demand trades.

The demand for scaffolding jobs went up by 40% compared to the previous year, lawn mowing was up by 37% and roof repairs were up by 32%. The top jobs posted on the site were for handymen, fencers, electricians, plumbers, painters, concreters, cleaners, tilers, builders and garden maintenance tradies.

The latest rise in renovation motivation is said to have come from the popular TV series "The Block". The areas in each where renovation rates have increased are:

Victoria - Point Cook, Berwick, Frankston, Craigieburn, Werribee, Tarneit, Melbourne, Pakenham, Hoppers Crossing and Glen Waverley.

NSW - Kellyville, Blacktown, Castle Hill, Baulkham Hills, Quakers Hill, Campbelltown, Maroubra, Schofields, Randwick and Sydney.

Queensland - Upper Coomera, Southport, Buderim, Robina, Surfers Paradise, Helensvale, Forest Lake, Coomera, Caboolture and Labrador.

Western Australia - Canning Vale, Baldivis, Dianella, Thornlie, Scarborough, Mandurah, Armadale, Morley and Perth.

South Australia - Adelaide, Morphett Vale, Mount Barker, Paralowie, Hallett Cove, Prospect, Aberfoyle Park, Mawson Lakes, Parafield Gardens and Golden Grove.

Lowe's launched its Pro Fulfillment Center in Charlotte, North Carolina in the second quarter, offering customers same and next-day deliveries directly from the facility.

The company also expanded its fulfillment capabilities direct from its Charlotte stores in April this year, with the rollout of a gig delivery network offering professional customers same- and next-day delivery, a spokesperson told Supply Chain Dive.

Lowe's and competitor The Home Depot have both invested in enhanced professional fulfillment capacity in recent months, building out operations to cater to the niche consumer segment.

The Home Depot, which has dominated the segment in the past, began a plan in 2020 to build three Georgia-based distribution centres over the following 18 months, with a key focus on fulfilling large orders for the segment with same and next-day delivery.

At Lowe's, the company hopes to make fulfillment faster and easier in a bid to be more competitive.

The Charlotte facility is one way the company is looking to speed fulfillment. As part of the pilot's launch, Lowe's expanded the facility's ability to handle large orders on multiple flatbeds, a spokesperson said.

In designing the pilot, the company increased inventory levels for pro customer specific SKUs, CEO Marvin Ellison said in June. The fulfillment centre is stocked with more than 1,000 professional-grade products, such as timber, building materials, roofing, sheetrock and insulation, according to a spokesperson. Mr Ellison said:

This new Pro fulfillment centre combines all these functionalities under one roof. So we're excited about what we're seeing in the short run, and we have a long-term plan to take these facilities and build out a network.

Retooling its delivery operations has been a focus for Lowe's since the early days of the pandemic, with a goal to simplify the process of getting products to customers. In doing so, the retailer aimed to free up space at stores and grow other supply chain activities, such as same-day and next-day fulfillment to job sites.

Lowe's also expanded its delivery network to select Florida markets in early August. Mr Ellison said during the company's recent earnings call to investors:

Because time is money for Pros, one of the most valuable ways that we can serve them is by saving them time with enhanced fulfillment.

Related

Australian retail and chemicals conglomerate Wesfarmers has released its results for FY2021/22. As expected, after two prior years of robust growth in many categories, the results were not quite as buoyant. Wesfarmers overall recorded revenue of $36.8 billion, up by 8.5% on the previous corresponding period (pcp), which was FY2020/21. However, that revenue includes inorganic growth from acquisitions in the health sector. Excluding those revenues, revenue was $32.6 billion, for growth of 4.9% over the pcp.

Similarly, with earnings before interest and taxation (EBIT), after interest and lease liabilities, and excluding significant items from FY2020/21, this came in at $3.4 billion, down -3.8% on the pcp. Net profit after tax (NPAT) was $2.4 billion. After excluding significant items from FY2020/21, this indicates a decline of -2.9% on the pcp.

While Wesfarmers' WesCEF (Chemicals, Energy & Fertilisers) and Industrial and Safety businesses reported strong gains in EBIT, Kmart Group saw EBIT decline by -39.7%, and EBIT at Officeworks fell by -14.6% on the pcp.

Bunnings results

The topline for Bunnings saw revenue grow by $883 million to $17,754 million, an increase of 5.2% on the pcp. EBIT was $2317 million, up by just 0.7% on the pcp. Total stores sales growth was up 4.2%, and store-on-store (comp) sales growth was 4.8% higher than the pcp.

In terms of overall market performance, hardware retail sales across Australia grew by 5.3% according to Australian Bureau of Statistics (ABS) figures. Given Bunnings' concentration of stores in Victoria, which saw hardware retail sales fall by -0.2% for the recent year, that likely indicates that Bunnings kept pace with the market but did not outperform it.

In terms of second half performance, Bunnings saw revenue of $8,545 million, and EBIT of $1002 million, which represents an increase of 9.3% and 3.4% respectively over the second half of FY2020/21. ABS figures indicate hardware retail sales grew by 8.5% for that half over the second half of FY2020/21. A note in the Wesfarmers Annual Report for FY2021/22 indicates that total store sales for Bunnings increased by 7.8% during the second half as well. This indicates Bunnings most likely did outperform the market from January to June 2022.

The results presentation followed a different pattern this year, at the request of the investment analysts, with less time spent on direct company reporting, and more time given over to questions. However, in a change of format, most listed companies are bringing out their annual reports to coincide with the full-year results, and these have provided some interesting material.

In outlining progress during the year, Mike Schneider, the managing director of Bunnings stated in the Bunnings section of the annual report:

Strong progress was made on the commercial 'Whole of Build' strategy, with new product ranges, enhanced capability of frame and truss, and improved sales support. Bunnings also launched a new fully-transactable e-commerce platform for commercial customers, and made further improvements to the PowerPass app with increasing usage by commercial customers to support ease of shop.

Tool Kit Depot expanded into Western Australia with six stores catering to local demand for professional tools and the acquisition of Beaumont Tiles completed in November 2021.

Mr Schneider's vision of the business is:

Over the past 10 years, Bunnings has evolved from a warehouse model offering around 34,000 hardware and home improvement products to an omnichannel business with over 110,000 home, commercial and lifestyle products across its in-store, online and marketplace offers.

Among the items listed as a "focus for the coming years" in the annual report were listed:

The path out of COVID-19

As Bunnings and Wesfarmers were quick to stress, the increase in both revenues and EBIT has been substantial for the big-box retailer when viewed over a longer timeframe. According to the ABS, retail sales grew by 28.4% from FY2018/19 to FY2021/22. Sales at Bunnings increased by 34.8% over that time span, while EBIT absent property income increased at close to 40%.

Laying out the results in that way indicates that the hardware retail industry has now come to the point that many - including HNN - forecast back in 2021, where the peak in growth has occurred, and the market will, at best, level off. There's little doubt that one reason for the apparent buoyancy in the current market is relatively high background inflation.

As HNN said back then, the task for publicly listed companies such as the Wesfarmers' owned Bunnings has always been to invest those high-phase earnings back into the business in such a way that the inevitable swing back to more diminished growth - or possibly even negative growth - will be cushioned by new and broader revenue streams.

How well has Bunnings managed to do this? In particular, what does the exceptionally low EBIT number mean for this context?

It's a question that also taxed the thoughts of several analysts, with Craig Woolford of MST Marquee putting it into a succinct question:

Just wanted to ask a question about the Bunnings...I guess I'd phrase it as the "EBITDA margin", particularly for the second half. To look at, I guess one of the measures you guys have looked at the second half 22 sales are up 36% [over three years]. But second half costs on a consistent accounting basis looks to be about 36% [over three years] as well. Unfortunately, we don't get enough disclosure to really understand whether that's product cost or cost of operating the business. But can you give us some clarity about, of that 36% cost growth, what is transitory in nature within that mix, and what is likely to be ongoing?

Mr Schneider replied:

We talked about the $71 million in extra costs [due to COVID-19], roughly half of that was in the second half. So that's clearly some, there's a little bit of cost in supply chain as well. And clearly, we're making some investments for the longer term as well, because that's the thing that, ultimately, we're really focused on, is long term growth and long term returns for the business.

Anthony Gianotti, the chief financial officer for Wesfarmers, added some additional clarification:

I think probably the only thing to add on there is there's probably a little bit of a mix change through that period. Because as Mike pointed out earlier, commercial has grown stronger through that period, particularly in the second half. And as we know, commercial is slightly lower margin, then consumer. And I think the only other thing is, there's been some investment through that period. So we've had [Tool Kit Depot] investments, and we've had Beaumont Tiles come on board. So I think there's a combination of things going on in there, as to the split in terms of there's obviously a level of investment that will continue. But there's a level of that that will actually reverse over time as well.

Mr Schneider also added that an additional factor was earlier stocking up in seasonal supplies for the first half of FY2022/23.

In fact, Bunnings has been investing in growth across four basic areas. There is the new tools business, Tool Kit Depot (TKD), which is designed to compete with Total Tools, Sydney Tools and a range of other trade tool specialist retailers. Secondly, there is the acquisition of Beaumont Tiles, which is an expansion not only into floor surfaces, but also bathroom fittings. Thirdly there is Bunnings ongoing expansion into trade and commercial business, with the company setting a 50/50 revenue goal, based on expanding both trade and DIY/consumer markets. Finally, there is Bunnings' ongoing expansion into online sales, and the further development of digital channels for sales, marketing and community.

It's important to understand that these changes are not just about market expansions, they are also fundamentally about broad shifts in markets. That idea that the markets have to play a large part in all this was brought up by analyst Richard Barwick of CLSA:

As you say, it's been a remarkable period of growth. Just be interested to hear your thoughts on how you can sort of work your way or cycle through this. Is there an inevitable slump in sales and earnings that we will be seeing in FY2022/23? And you will be restricted in what you can say, but perhaps if you can give some context around the shape of sales. So, obviously, in the second half, you saw trade outperform DIY. I just go back to one of your comments. I think you made it at the strategy day, wasn't this year but perhaps last year, talking about people that [won't] paint their house twice [in the same year]. So just love to hear your thoughts on how you think Bunnings will shape up over the next 12 months.

Mr Schneider replied:

We can see more clearly on the commercial side of the business because of the sort of pipelines of work, that one's a little bit easier to sort of see. And with availability now in categories like timber, insulation, board product, there's pent up demand. I think Anthony touched on that sort of mix in the second half, some of that is a little bit of catch up in the work that's outstanding.

But talking about builder customers, strong pipelines, two and three years out, and the type of construction that we're focused on, the smaller builder, they're not managing some of these bigger projects, where you've seen some building companies get themselves into a bit of trouble. So I think there's a lot of opportunity for us to pursue there.

The "whole of build" strategy, the team have sort of built into the way we're thinking about that through the different segments of Bunnings. Also TKD, and Beaumont tiles, I think gives us a great opportunity to really earn the right to be chosen by customers in that space.

On the consumer side, I think there has been a structural shift in the way that that our customers think about their home, it's become a workplace, it's become a classroom, it's become somewhere that you're spending more periods of time. When you're working from home two to three days a week, there is more wear and tear on the house, you're seeing more things to do. And we saw also see that over the last few years, customers have actually really developed quite a new array of DIY skills. We've been able to bring new products and services and categories into the market to be able to meet those needs. So we sort of, you know, have a view that with people at home a little bit more, that is going to [grow].

As I touched on earlier, we've got some parts of Australia and New Zealand where for the first time in quite a while we've got the ability to actually trade our stores through a spring and summer cycle, hopefully without interruption. So I think that that structural shift is there, and I'm really focused on driving strong growth as we move through this financial year and beyond.

Analysis

When we look back over the history of Bunnings, we see a company that began at the intersection of a number of trends that would help to define the first two decades of the 21st Century in Australia. There was the floating of the Australian dollar during the 1990s, the opening up of China as a manufacturing base, the increasing financialisation of home ownership as urban centres grew in importance, and the rise of new, more efficient logistics models.

To a large extent, we seem set now to witness the beginning of the end or at least the transformation of most of those trends. That's not necessarily because any of those areas has grown all that less important, but because the potential for growth in all of them has diminished sharply in recent years.

The question, then, for companies such as Wesfarmers and its subsidiary Bunnings is where is the growth - which is what is needed in order to continue as a viable investment vehicle on the Australian Stock Exchange - going to come from?

At the moment, the answer that Bunnings at least is providing is to follow a "tried and true" pattern of expansion using Wesfarmers capacity to organise and efficiently scale businesses. The move into trade sales, for example, is something HNN predicted back when Metcash first decided to acquire Danks/Home Timber & Hardware and create the Independent Hardware Group (IHG). That merger was presented to the Australian Competition & Consumer Commission as a "hedge" against Bunnings' influence, but it also set up the trade market for more competition.

That said, one would be forgiven for thinking that the approach that Bunnings has chosen to take to trade sales, what it terms "whole of build", is somewhat associated with IHG's "whole of house" strategy, first formulated by IHG CEO Annette Welsh in 2018.

TKD may have some innovative ideas behind it, but it's also a straight competitor to an existing retail solution, already pioneered by Total Tools and Sydney Tools. We don't know exactly what Bunnings plans to do with Beaumont Tiles, but while it's certainly a worthy company, the only real innovation the tile industry has seen for some time is the spread of inkjet printed tiles which can better emulate other surfaces.

Then of course there is online. It's difficult to think that anyone comparing the websites for The Home Depot, Lowe's Companies or Kingfisher's B&Q with Bunnings would see the Australian site as being anywhere other than at the bottom of that group. It's not a bad website, but it doesn't excel, either.

What Bunnings did really well back around 2000 was to understand that there was an emerging discontinuity in the market. Taking advantage of that discontinuity disrupted standard hardware retailers then, and still continues to disrupt them today. But now there is a new discontinuity on the horizon, and there are few signs that Bunnings, or even Wesfarmers, are really positioned to take advantage of this.