Renovations go through the roof

Canadians now spend more on improvements than on new homes

Continued low borrowing costs and a growing housing stock will boost spending on renovations in Alberta this year and next year, says a report by the Altus Group.

The report said renovation spending, defined as the sum of residential alterations, conversions and repairs, reached $7.6 billion in the province in 2014, up 3.7 per cent from 2013, the secondhighest growth rate in the country behind Ontario’s 4.1 per cent.

The Altus Group is forecasting spending to increase by 2.6 per cent this year and by 3.8 per cent next year in the province.

“While low interest rates will give some homeowners an incentive to go ahead with renovations, the slowdown and the uncertainty in the economy along with a decline in homes sales will hold back growth in overall renovation spending in Alberta compared to previous years,” said Richard Cho, principal, market analysis with Canada Mortgage and Housing Corp. in Calgary.

In Canada, renovation spending reached an estimated $67.8 billion last year, up 3.2 per cent from 2013.

“At a time when growth in the overall economy has been lacklustre, the renovation sector has been more than pulling its weight,” said the report, adding the sector “has entered into what is expected to be a multi-year period of outperforming the overall economy.”

Spending is forecast to grow by 3.1 per cent this year and by 3.4 per cent next year across the country.

In contrast, Altus Group said Canadians spent $48 billion on new home construction in 2014 “meaning that we currently spend substantially more as a nation on improving and repairing our existing homes than on constructing new ones.”

The report said the renovation sector accounted for 3.4 per cent of Canada’s gross domestic product in 2014 and renovations are the top reason Canadians borrow with home equity lines of credit.

Alterations/improvements is the biggest component of renovations, contributing about three out of every four dollars spent.

The report said beginning in the 2000s to the recession, spending on renovations grew at 8.7 per cent on an average annual rate. But for the last seven years, including the recession and the subsequent recovery, it has been 2.6 per cent as an average annual rate of growth.

Altus Group said this is still “impressive” when it is compared to the overall Canadian economic average annual growth rate of 1.6 per cent during the same period.