Photo: John Robb/Flickr
Brendan Charters doesn’t expect his calendar to clear up anytime soon. The co-founder of Eurodale Developments in Toronto says the remodelling industry has progressively gotten busier and busier since he started the business in 2003.
“For the last ten years, we’ve been booked out anywhere from six months to a year in advance,” he says.
Charters has his hands full working on overhauling city homes, largely in the midtown area, with many of the 1930s-era houses needing better waterproofing, new pipes or modern mechanical systems.
The other trend in Toronto? More and more of his clients are intent on maximizing every square inch of property available. Forget simple aesthetic upgrades – homeowners are choosing basement build outs and expansive additions.
“Years ago, a $400,000 project would have been a big project,” says Charters. “Now it’s not uncommon to have $700,000 or even $800,000 spent on a reno.”
Remodeling fever isn’t limited to Torontonians. It appears Canadians are a house proud bunch, spending more and more money on revamps and restorations. In the third quarter, Statistics Canada reported renovation spending reached $13.9 billion nationwide, an 8.9 per cent jump over last year.
Spending on sprucing up existing housing stock has even outpaced investment in new dwellings, which reached $13.2 billion in the third quarter.
The phenomenon of Canadians putting more money into refurbishing existing homes than on new builds is a new one. It’s a story of “love the one you’ve got,” as big cities see land values skyrocket while interest rates remain low.
“Historically, we haven’t really seen that other than brief periods during recessions, so it’s a pretty meaningful shift that’s gone on,” says Robert Kavcic, Economist at the Bank of Montreal (BMO).
In a research note published this fall, BMO found more money was spent on renovations than on new dwellings in the last 12 months, ending in June, with Canadians spending $48.4 billion and $46.3 billion, respectively.
Kavcic doesn’t have a black and white answer as to why this is happening, but does cite building constraints in major cities such as Ontario’s Green Belt plan, which protects land from development in and around the Greater Toronto Area, as well as the limited land availability in Vancouver.
“Rates are low and homeowners have a lot of equity in their homes so those renovations become reasonable, or available. Plus there’s just not a lot of room to build out so younger couples have to buy up older homes that they have to fix up to get a decent location in the city,” he says.
It’s certainly something Charters has noticed in his work.
“Freehold homes seem to be going the way of the dodo bird in Toronto so it’s more of the affluent people purchasing the single family homes. Because the homes are older housing stock and we don’t live in 800 square feet like our parents or our grandparents did, we’re typically adding massive additions out the back with a full renovation of the existing home as well,” he says.
Provincial data points to year-over-year increases in renovation spending in Ontario, which rose to $5.2 billion in the third quarter of 2014. It’s more than a 10 per cent increase over the $4.7 billion spent on home renovations the year before.
The picture is slightly different in Alberta, where spending on renos dropped from about $1.3 billion in the the third quarter of 2013 to $1.2 billion the year. Kavcic points out that there’s more room to build new houses in and around Alberta cities, which could factor into the provincial differences.
Lara Murphy, co-owner of Ryan Murphy Construction in Calgary, says she hasn’t seen a slowdown in renovation work.
“In the last five years, people were unnerved when things started to go south in 2008. There was an inclination for people to hibernate, to a certain degree, and look at putting some money into their own homes rather than taking a chance on buying a new property because there was talk interest rates would rise every month.”
She sees a lot of remodelling in older neighbourhoods in the city such as Inglewood and Kensington, with many homeowners opting for kitchen and bathroom upgrades to boost their home value.
“We’ve also seen a massive increase in the value of residential property so it still makes more sense to a lot of individuals to think, ‘I can work with this, let’s re-finish, let’s just try to remodel it to suit us’ rather than buy a new house because everybody’s property value goes up at the same time.”
Charters says about 75 to 80 per cent of his company’s clients have owned their home for years and are upgrading, as opposed to brand new owners looking to overhaul a freshly purchased property.
The move towards massive remodels can unleash other issues, as renovated homes fetch higher prices on the market and, when enough happen in a concentrated area, can push up the home values of their neighbours. A report by CIBC published in September said the rising tide of house prices, plus the drop in new listings, has paralyzed the move-up market, forcing many owners to stay put and renovate.
The bank predicted renovation activity will stay robust and “might accelerate in the coming years.” But with the recent decline in oil prices in the West, and the Canadian Real Estate Association airing its concerns about potential risks to the market in 2015, that could change. Who knows if we’ll see as many Canadians adding new granite counters in their kitchens or building that fourth bedroom addition.