WHY THE RENOVATOR’S DELIGHT HAS DONE ITS DASH
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WHY THE RENOVATOR’S DELIGHT HAS DONE ITS DASH

Skills shortages and rising costs take their toll on buyer interest

By Kirsten Craze
Fri, Dec 2, 2022 9:48amGrey Clock 4 min

 Australia’s love affair with the renovator’s delight could be on the rocks as skyrocketing building costs and the country’s biggest tradie shortage in decades take hold.

Just 12 months ago comparison site Finder conducted a homebuyer survey which revealed four in five purchasers wanted to buy to renovate as housing supply was low and property prices were soaring. But what a difference a year makes.

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Today, building materials are scarce and the most acute shortage of building professionals is for bricklayers, carpenters and roofers. In March, Jobs board Seek tracked the highest number of job advertisements in its 25-year history with the Trades and Services industry driving most of the available jobs. The shortfall may be a result of the Federal Government’s HomeBuilder scheme, which injected more than 130,000 new builds or large renovations into the market, coupled with a drought of foreign skilled workers brought on by two years of closed borders.

So unless buyers have a trade under their own tool belt or a personal pipeline to products then renovating needs to be a long term goal with an elastic budget.

As a result, daggy and dated homes are proving less popular. But for patient purchasers who are happy to put renovations on ice, this changed climate is translating to more bargaining power.

“Good things do come to those who wait and this is probably the most favourable buyer’s market I’ve been in for a few years,” said Sydney-based buyer’s agent Michelle May. “But a lot of buyers are unable to see potential in older homes. “With our clients we sometimes have to convince them to have a look at these places because often they’re not actually that bad.” 

She says many buyers have become accustomed to seeing properties online that look amazing.

“They’re styled to within an inch of their lives, there are gorgeous people with their dogs in the images and you can almost smell the Aesop candles. It’s like you’re flicking through an interiors magazine.”

May explained that anything on the market which hasn’t been styled, is perhaps a deceased estate with a decades-old kitchen or bathroom is being overlooked by many buyers.

“I say to my clients ‘If this had been styled by professionals you’d have wanted to look, whereas you’re quickly dismissing it.’ But maybe it’s actually in a great location and the bones are really good. As long as you’re willing to put up with it for a couple of years and ride out this market recalibration, you could actually do really well.”

Home stager and interior designer Kyara Coakes, founder of The Property Stylist, says selling agents are telling her listings in need of significant work are not attracting much attention, opening the window for savvy buyers looking to negotiate.

“Agents are coming to me because they’re finding almost no one’s even looking at them,” Coakes says. “Some of the agents are saying they’re only getting one or two people per inspection but fully renovated or styled properties are still selling within two weeks, even in a quieter market. It’s like demand has just completely changed.

“For the past 10 years – well before COVID – people were definitely wanting to put their own stamp on a property, but that’s definitely not the case anymore.”

Unsurprisingly, May says the popularity of reality TV shows such as The Block, House Rules and Selling Houses Australia have all contributed to the demand for renovator’s delights over the past decade. Before the construction crisis, she said many renovators who didn’t do their homework found themselves buying a money pit. Now, however, she warns the gamble could be even greater.

“You always get first-home buyers, or inexperienced buyers, who overestimate their own DIY skills and underestimate the cost of trades – even prior to COVID and the import crisis,” May says. “I feel it’s our job to take the rose-tinted glasses off for those clients. 

“We’ve renovated and flipped so many properties and it’s not as easy as it looks on The Block.”

Building woes have even hammered the successful reality show with producers of The Block 2022 struggling to land enough tradespeople and making a last-minute call out via the media to source skilled workers to finish the contestants’ houses.

“People who’ve never renovated before, or have no idea what they’re up against in the first place, don’t really get what this crisis means,” she says. “But people who are in the know, they’re definitely holding off and you see it in the auction results on Saturdays.” 

She says when the market was hot, she was bidding against small-to-medium builders who had the economies of scale and the know-how to renovate well. 

“There’s not the profit for them now so they’re dropping off,” May says. “On the other hand, properties with everything done are still going gangbusters and are exceeding expectations. It’s clear renovator’s delights have come off the boil.”

Ultimately, while there are opportunities out there for buyers who are willing to wait, May said research and due diligence is still key. She stressed the old real estate adage of buying “the worst house in the best street” might be great in theory, but not always in practice if the downsides of the home are beyond renovating.

“There’s sometimes a good reason why it’s the worst house on the best street,” she suggests. “It could be a very skinny terrace, or the bathroom is way in the back of the house which could be extremely costly to move, or the street behind it has a huge apartment building so you have no privacy. 

“Just be mindful that renovating is definitely not for the faint-hearted and in some cases, it should be kept on TV.”



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Why Prices of the World’s Most Expensive Handbags Keep Rising

Designers are charging more for their most recognisable bags to maintain the appearance of exclusivity as the industry balloons

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The price of a basic Hermès Birkin handbag has jumped $1,000. This first-world problem for fashionistas is a sign that luxury brands are playing harder to get with their most sought-after products.

Hermès recently raised the cost of a basic Birkin 25-centimeter handbag in its U.S. stores by 10% to $11,400 before sales tax, according to data from luxury handbag forum PurseBop. Rarer Birkins made with exotic skins such as crocodile have jumped more than 20%. The Paris brand says it only increases prices to offset higher manufacturing costs, but this year’s increase is its largest in at least a decade.

The brand may feel under pressure to defend its reputation as the maker of the world’s most expensive handbags. The “Birkin premium”—the price difference between the Hermès bag and its closest competitor , the Chanel Classic Flap in medium—shrank from 70% in 2019 to 2% last year, according to PurseBop founder Monika Arora. Privately owned Chanel has jacked up the price of its most popular handbag by 75% since before the pandemic.

Eye-watering price increases on luxury brands’ benchmark products are a wider trend. Prada ’s Galleria bag will set shoppers back a cool $4,600—85% more than in 2019, according to the Wayback Machine internet archive. Christian Dior ’s Lady Dior bag and the Louis Vuitton Neverfull are both 45% more expensive, PurseBop data show.

With the U.S. consumer-price index up a fifth since 2019, luxury brands do need to offset higher wage and materials costs. But the inflation-beating increases are also a way to manage the challenge presented by their own success: how to maintain an aura of exclusivity at the same time as strong sales.

Luxury brands have grown enormously in recent years, helped by the Covid-19 lockdowns, when consumers had fewer outlets for spending. LVMH ’s fashion and leather goods division alone has almost doubled in size since 2019, with €42.2 billion in sales last year, equivalent to $45.8 billion at current exchange rates. Gucci, Chanel and Hermès all make more than $10 billion in sales a year. One way to avoid overexposure is to sell fewer items at much higher prices.

Many aspirational shoppers can no longer afford the handbags, but luxury brands can’t risk alienating them altogether. This may explain why labels such as Hermès and Prada have launched makeup lines and Gucci’s owner Kering is pushing deeper into eyewear. These cheaper categories can be a kind of consolation prize. They can also be sold in the tens of millions without saturating the market.

“Cosmetics are invisible—unless you catch someone applying lipstick and see the logo, you can’t tell the brand,” says Luca Solca, luxury analyst at Bernstein.

Most of the luxury industry’s growth in 2024 will come from price increases. Sales are expected to rise by 7% this year, according to Bernstein estimates, even as brands only sell 1% to 2% more stuff.

Limiting volume growth this way only works if a brand is so popular that shoppers won’t balk at climbing prices and defect to another label. Some companies may have pushed prices beyond what consumers think they are worth. Sales of Prada’s handbags rose a meagre 1% in its last quarter and the group’s cheaper sister label Miu Miu is growing faster.

Ramping up prices can invite unflattering comparisons. At more than $2,000, Burberry ’s small Lola bag is around 40% more expensive today than it was a few years ago. Luxury shoppers may decide that tried and tested styles such as Louis Vuitton’s Neverfull bag, which is now a little cheaper than the Burberry bag, are a better buy—especially as Louis Vuitton bags hold their value better in the resale market.

Aggressive price increases can also drive shoppers to secondhand websites. If a barely used Prada Galleria bag in excellent condition can be picked up for $1,500 on luxury resale website The Real Real, it is less appealing to pay three times that amount for the bag brand new.

The strategy won’t help everyone, but for the best luxury brands, stretching the price spectrum can keep the risks of growth in check.

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