Canadians spending more on fixing homes than buying new ones as renovations top $68 billion
Maybe it’s the influence of all those home renovation shows or perhaps it’s the cost of moving, but Canadians are increasingly spending more money to update their houses than to purchase new ones.
A new survey shows renovation spending reached $68 billion in 2014, $20 billion more than was spent on new homes last year.
Some of it is the so-called “HGTV effect,” according to Altus Group, but Peter Norman, chief economist with the real estate research company, said it’s also because the housing stock in Canada just keeps getting older.
“There are a number of homes out there that are more 50 years old and they require a lot of work all the time,” he said, adding that low interest rates have probably helped the renovation sector more than the new home sector. “Every person who renews their mortgage from five years ago renews it at a lower rate. To a lot of people that frees up cash they’ll put back into their house.”
Altus expects the spending on renovations to continue to grow by three per cent annually in 2015 and 2016, which would leave renovation outperforming the general economy.
Renovation spending is now such an important part of the overall Canadian economy that it accounted for 3.4 per cent of gross domestic product in 2014.
Most of the spending, three out of every four dollars, is going toward alterations or improvements. The rest of the spending is primarily going towards repairs.
Gregory Klump, chief economist for the Canadian Real Estate Association, said strong real estate sales ultimately lead to renovation spending. The average amount of money spent on renovations following a real estate sale was $9,535 in 2013.
“Often it can make a lot of economic sense to renovate instead of moving,” Klump said.
From the 2000s up to the recession, renovation spending grew by 8.7 per cent annually. Post-recession it grew by 2.6 per cent annually.
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