ADY - Spending

Renovation Spending

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.
But where exactly is the renovation money being spent and who is spending it? Canada Mortgage and Housing Corporation(CMHC) 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.

Story courtesy of Home bUILDER Magazine, charts courtesy of CHMC

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