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Homeowners in Canada are projected to spend more than ever before on renovations while, at the same time, homebuyers are expected to drop record amounts on new homes, a recent Scotiabank Economics report on home renovations suggests.
“New construction is still larger than renovation spending,” Adrienne Warren tells BuzzBuzzHome News, but notes renos are “somewhat in the same ballpark” now.
In fact, Canadians are on pace to invest a total of $53 billion on household improvements in 2015, up from $50.0 billion the year before and a record amount for a single year. Meanwhile, Scotiabank predicts Canadians will spend $60 billion on new construction homes this year, also a record, up $3 billion over 2014. These figures don’t include legal or realtor fees, explained Warren.
Spending on upgrades such as new additions, changes to current structures, equipment replacements, and installations was up six per cent year-over-year in the first half of 2015 (or 3.5 per cent taking inflation into account).
However, Warren noted that tracking renos presents its own challenges. “It’s a tough sector to really estimate because some of it’s underground,” she said, referring to homeowners who don’t apply for permits before upgrading their homes.
Regardless, reno spending was up in all provinces except Alberta, according to the report which was based on data from Statistics Canada.
The increased renovation levels reflect the heightened number of home sales, which are up about five per cent from last year, and consistent housing starts, which are projected to equal 2014’s total of 190,000 units, the report said.
Canada’s home ownership rate of nearly 70 per cent is also supportive of renovations because homeowners, rather than landlords or tenants, typically invest money in upgrading a property.
Among those investing in renos, many have recently purchased their homes. Renovation is also a popular course of action for sellers getting ready to put their properties on the market.
Though the dollar figure attached to overall renovations is expected to mark an all-time high, the gains still pale in comparison to the year-over-year increases seen leading up to the Great Recession.
From 2000 to 2007, annual renovation-spending gains averaged 9 per cent, a fact Scotiabank attributes to a better employment outlook and climbing wages. By comparison, renovation expenditures have risen about 3 per cent per year on average in the post-recession years.
The previous peak for new-home sales in dollars was 2012, when Canadians spent 57.3 billion. That year, $45.8 billion was invested in renos, so they’ve been “growing faster,” said Warren.