Renovation Spending
Where and how homeowners spend $2.5 billion a month.
By Dermot Mark
The numbers are staggering.
Spending on home renovations in Canada is now cresting over $2.5 billion per
month and, according to forecasts, will total $33.4 billion in 2004, double
the pace of just a decade ago.
The reasons are varied - linked to aging housing, an aging population, the
high cost of urban land and a strong resale housing market - but the conclusion
is clear: Canada is in the midst of the biggest home improvement boom in history
and it shows no sign of slowing down.
This December, Statistics Canada will release its survey of renovation spending
in Canada and it is expected to reveal a steady ramping up in spending since
StatsCan started the survey 12 years ago. In 1992, for instance, Canadians
spent $14.9 billion on home repairs and improvements, in constant dollars.
The last StatsCan survey, published last December, showed that 64 per cent
of all renovation spending was devoted to work contracted out.
The demand curve comes as no surprise to professional renovators, most of
whom have been going flat out in the past year. "When you figure that
a building lot here can cost $700,000, it is easy to understand why people
decide to stay put and renovate," summed up Oakville, Ontario renovator
Michael Cochren, who will handle nearly $2 million in contracts this year.
"Even a high-end renovation is less expensive than buying a lot and building
a new house."
But where exactly is the renovation money being spent and who is spending
it? Canada Mortgage and Housing released an exhaustive survey of the renovation
market earlier this year, which provides insight into what is going on.
Who are the clients?
First, the potential client base is huge. Seventy-six per cent of Canadian
households made at least one renovation last year and 31 per cent plan to
do renovations next year, worth at least $1,000.
The CMHC survey, snapped in five cities, found "strong to moderate renovation
intentions" range from a low of 28 per cent in Vancouver to a high of
39 per cent in Halifax. Yet, if Vancouver is supposed to be a slow renovation
market, no one has told homeowners, who local renovators say are driving the
market to record levels. "We are turning down work now," admits
Bob Rasmus, one of Vancouver's leading renovators. "We could be working
24-7 if we wanted."
The survey found that the typical household doing renovations is, not surprisingly,
from 35 to 54 years of age with larger households and higher income levels.
Most of them have kids and the renovation decision is a joint decision between
the husband and the wife.
Separate studies have also linked the renovation ramp-up to higher resales.
This year, about one in three Canadian homeowners plans to renovate, according
to a 2003 survey conducted for Royal Bank by the Angus Reid Group, which compared
renovations to the resale housing market. A separate survey by Re/Max found
that a large number of home buyers are now purchasing with renovations already
in mind. "We are finding that more and more buyers are willing to sacrifice
the condition of the home for the right location," said Re/Max Western
Canada regional director Elton Ash, "thereby fueling the renovation boom."
There are 400,000 resales expected this year and 385,500 in 2004, and the
majority of buyers will make some changes to the house within five years of
the purchase. As well, 11 per cent of those doing renovations said it was
because they "plan to sell soon." CMHC notes that the rise in new
home building will generate "many additions, such as decks, fences and
landscaping."
Why are they renovating?
The main reason for renovating, according to the CMHC survey of 19,381 households,
is vaguely defined as "wear and tear", which accounted for 50 per
cent of the market. In second place is a need to convert unused space, often
a basement or attic, at 29 per cent. Adding living space was selected by 21
per cent as a reason to renovate, while the need for urgent repairs made up
27 per cent of the market. Lower on the list were special needs (9 per cent)
and rental apartments (3 per cent).
It is clear when you talk directly to renovators that they see a major trend
toward larger and more expensive renovations. In the Pulse Survey of CHBA
members taken this summer, the biggest increase in the type of contracts was
a "complete interior/exterior renovation," up 29 per cent. Room
additions, up 28 per cent, was second, followed by kitchens, baths, basement
and recreation room renovations, and energy efficiency. Requests for "special
needs" changes to make a home more accessible were down 8 per cent from
a year earlier.
While there was only a 3 per cent increase in energy efficiency improvements,
this could change next year as households line up for federal government energy
grants, which can total as much as $3,000 if a lot of work is done.
Whatever the reasons, it appears that renovators are confident they are riding
one the fastest growing sectors of the construction industry. According to
the Pulse survey, 38 per cent of renovators expect sales to increase in 2004
and 51 per cent expect it to remain the same - which is very good indeed.
HB
