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© Copyright 2007 Work-4 Projects Ltd.
A Closer Look: Snapshots of the Renovation Industry

By Nachmi Artzy

This issue's Readers Survey looks at current and projected sales activity, what product and services sell best, the labour shortage, cash sales activity and what can be done about it.


Renovation continues to be strong. Fifty-two per cent of renovators who responded to our survey reported higher sales averaging a 33 per cent increase over last year, while only eight per cent had lower sales. The balance maintained last year's level. Among builders, 44 per cent had renovation activity increase by an average of 32 per cent, while only five per cent experienced lower sales.
In Ontario, 50 per cent had higher sales and reported a strong increase of 43 per cent, on average. However, Quebec reported the strongest results, with 67 per cent saying they had higher sales, by an average of 47 per cent. None of the Quebec respondents had lower sales this year so far. Half the reporting companies from British Columbia, Alberta, Manitoba and Saskatchewan had higher sales, averaging from 20 per cent in the latter two to 34 per cent in Alberta and 27 per cent in BC.
For next year, projections continue to be strong, with 48 per cent of renovators and 41 per cent of builders projecting higher renovation sales by 31 and 21 per cent, respectively.

Products and projects in demand

The majority of builders and renovators said that, without doubt, the most sought-after renovation projects are kitchens and bathrooms. At some distance behind were flooring and energy efficiency. Farther down the list were demands for colours, trims, built-ins and security. Builders and renovators had the same job requests, with renovators saying that bathrooms where just slightly ahead of kitchens in demand.
Regionally, in Ontario energy efficiency ranked third, behind kitchens and bathrooms. In Quebec, energy efficiency ranked third and flooring came in fourth. Demand for trims and "green" building was stronger. In British Columbia, bathrooms had a slightly higher demand than kitchens did, and colours, trims and energy efficiency followed. In Alberta, the top four items where kitchens, bathrooms, flooring and energy efficiency, all with strong demand, followed by trims, colours, built-ins and security. In Manitoba and Saskatchewan, following kitchens, bathrooms and energy efficiency was green building, colours and flooring. In the Atlantic provinces, the demand was strong for bathrooms, kitchens, energy efficiency and flooring.

More qualified workers needed
Labour shortages continue to be a major problem. Forty-eight per cent of renovators and 45 per cent of builders were affected. When we add responses of "somewhat affected" to the results, 90 per cent of builders and 75 per cent of renovators say they could use more workers to do the jobs on hand. The situation is similar to last year, with the problem increasing in British Columbia, Quebec and Ontario.
The suggestions for alleviating this problem were on three levels: first, increase promotion and education to the younger generation; second, relax immigration requirements for skilled labour, both inter-provincially and internationally; and, finally, change regulation ratios of apprentices to foremen. "Offer more education at the high school level to let students know they can earn a comfortable living in the trades," says BILL MARTIN, a renovator from Stittsville, Ontario. "Government should invest in publicity to encourage the younger generations and put in place educational programs starting in high-school and/or special training schools," says contractor MICHEAL IAFIGLIOLA, Altamax Construction, from Sainte Sophie, Quebec. "More educational opportunities through apprenticeship training, easier immigration policies for highly trained and qualified skilled trades people," suggests Coleen from DW Wallace Construction in Swift Current, Saskatchewan.


Underground economy: Is it growing?
The underground economy, or the practice of making cash transactions, continues to grow - even faster than the market's growth. Overall, 42 per cent of survey respondents estimated that cash sales account for 33 per cent of market activities. This figure is almost 50 per cent higher than last year's estimate of 23 per cent. Here are the provincial estimates for the size of the cash market (with last year's estimates in parentheses): Atlantic provinces - 36% (38%), Quebec - 41% (17%), Ontario - 36% (27%), Manitoba and Saskatchewan - 38% (17%), British Columbia - 32% (21%). On small jobs under $1,000, the estimates are that 62 per cent are done in cash and, even for jobs over $10,000, an estimated 14 per cent are done in cash. See full regional results by job size in the chart below.

Tackling the underground economy will be a monumental task requiring all major government departments to cooperate with leading industry associations and organizations. Still, we asked our readers what they think can be done. What is clear is that consumer education is needed and, perhaps, incentives to consumers to produce a valid invoice to get tax benefits. Fifty-four per cent of our readers wanted to see more consumer education, 43 per cent recommended a reduction in sales taxes, 40 per cent wanted to see higher association profiles, 36 per cent recommended increasing fines, 29 per cent suggested increasing regulations, and 23 per cent recommended reporting to authorities.
"This is not a contractor created problem," says a renovator from Halifax. "The solution lies with tax and regulatory bodies. These bear the costs that are avoided in cash transactions. Until there is a political will to stop cash transactions, there will not be a change, for the better, in the pattern."
"A number of steps could be taken to alleviate the cash sales situation," says a high profile renovator in Toronto. "The system, as it stand today, does very little to combat the cash culture. The regulations cost the professional or honest renovator in time and labour to provide all the information required by the national, provincial and local governments. The increased regulations causes the cash industry to stay underground and will drive more renovators/builders/trades etc. to the underground economy. We would need input from all levels of government together with the players in the industry to find a better way." HB

On August 23, 2007, we conducted an e-mail readers survey. As of September 6, we received a response from 108 readers. Please note that this survey, by nature, reaches the more "sophisticated" in the industry and therefore lacks the input of some operators. For the survey analysis, we used 106 replies, 39 from builders as one group and 67 from renovators and contractors as another group.
Response by province was as follows: British Columbia - 23%, Alberta - 21%, Saskatchewan - 3%, Manitoba - 3%, Ontario - 32%, Quebec - 7%, Nova Scotia - 7%, New Brunswick - 2%, and Newfoundland - 2%.
Of the builders responding, 43 per cent have been in business for over 20 years and 25.6 per cent from six to 20 years. Among renovators/contractors, 43.3 per cent have been in business for over 20 years and 28.4 per cent for six to 20 years.
We offered respondents a free listing on the Home BUILDER Web site (www.homebuildercanada.com) and a chance to win a Metaltech Telescopic Ladder worth $300.
Congratulations to the winners of the Zircon video level from the July Readers Survey: Bryan Klinkhammer of Furnasman New Homes, Winnipeg; Jahan Shariat of Arcco Management & Contracting Inc., North Vancouver; Mike Keizer of Acacia Custom Homes Ltd., Okotoks, Alberta; Michael Iafigliola of Altamax Construction & Development Inc., Ste-Sophie, Quebec; Kelly Coghill of Creative Innovations and Designs, Calgary; and Dave Maccasey of Windoscapings, Oshawa, Ontario.

Home Builder Magazine will continue to conduct timely surveys about issues of concern. If you'd like to participate, please register (click here) to be counted and to let us know what you think.


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