Renovation
Outlook 2005
By Dermot Mack
 |
Renovation spending will
hit $38 billion in 2005, far outpacing new home construction.
You don't have to look far anywhere in Canada to see that the renovation sector
is booming. However, new evidence shows that the market is even bigger and
broader than anyone suspected.
The true picture is being revealed as analysts begin to track the correlation
between a roaring resale market and renovation spending, research that revealed
that people often decide to renovate within three years of buying a house.
When one figures that 434,682 resale homes were bought last year in Canada,
it easy to understand why renovations are a hot market today.
Now, in a rare reversal, Statistics Canada admits that it has been underestimating
the renovation sector for at least five years. The agency, for instance, has
raised the estimate of annual spending for 2002 from less than $25 billion
to $29.8 billion. And, StatsCan reports, spending on home repairs and improvements
has been accelerating in a near straight line up for this decade rising from
just under $25 billion in 2000 to a projected $36.3 billion this year.
As well, in 2005, according to both StatsCan and Canada Mortgage and Housing
Corporation, total spending on home renovations will rise a further six per
cent to $38 billion. This is an all-time record and far ahead of spending
on new home construction, which is forecast to total $30.1 billion next year.
There are various reasons for a buoyant renovation sector, according to CMHC,
which credits historical low mortgage rates, a solid economy and higher employment
levels.
CMHC analyst Julie Taylor, however, notes that "sales of existing homes
are the principal driving force behind renovation spending." Taylor explains
that while resales are expected to dip slightly in 2005, "the record
sales in 2003 and 2004 will continue to provide a solid foundation for renovation
activity."
While renovations are strong across Canada, there are some areas that are
more active than others and should remain so into next year.
British Columbia
Resale activity and the highest house prices in the country are making B.C.
the hottest renovation market in Canada, according to CMHC.
Resales in B.C. are forecast to reach 100,000 homes in 2004, spurring renovation
spending to $4.6 billion this year, up a startling 10.3 per cent from a year
earlier.
The average resale house price in Greater Vancouver is now $504,000 and, province-wide,
it reached $288,000 in September. This has caused a triple uplift for renovations:
more home buyers means more renovations, high home equity allows existing
homeowners to borrow for home renovations and, facing a shortage of prime
listings, some homeowners are opting to renovate rather than a move to a less
desirable neighbourhood. According to CMHC, all this will encourage renovation
spending through 2005, when B.C. is expected to exceed the national average
in renovation spending.
Prairies
Alberta, not surprisingly, will lead renovation spending on the Prairies,
both in growth and in actual numbers. This year, spending will increase 5.5
per cent in the province, with a 2.9 per cent increase forecast for 2005,
to $3.3 billion. Manitoba spending will increase 5.2 per cent in 2004, with
a slower pace of 3.1 per cent growth in 2005. A lack of listings in resale
market has encouraged some potential buyers to stay put and fix up the house
instead. Total spending in the province next year is pegged at just over $1
million. Saskatchewan will see $955 million in renovation expenditures in
2005, up from $930 million this year and $888 million in 2002, says CMHC.
Ontario
A record resale market has pushed renovation spending in Canada's premier
market to $14.2 billion this year and it will rise a further 5.1 per cent
next year to $15 billion, CMHC projects. As in Vancouver, a rise in the rental
vacancy rate is also expected to boost renovations of Toronto's aging rental
stock. The renovation pace in Ontario is slowing after posting a 12.2 per
cent increase in 2003 and 9.1 per cent this year. Ontario renovators, however,
say there has been a noticeable increase in higher-end renovations as homeowners
tap into an increase in equity.
Quebec
Quebec is expected to see renovation spending rise 10.2 per cent in 2004,
compared to a year earlier and jump 8.5 per cent in 2005 to $10.3 billion,
CMHC analysts say. An increase in resales in 2004 is credited for fuelling
a rise in renovations that should continue for the next 12 to 18 months. Listings
of homes for sale remain below the average level of the past decade, which
should encourage more homeowners to renovate, CMHC surmises.
Atlantic Canada
With housing stock older than in most of Canada, renovations continue to play
a significant role in residential construction activity. New Brunswick is
expected to see the largest renovation spending growth in the Atlantic region,
with a 9.8 per cent increase in 2004, but slowing to 4.1 per cent in 2005.
Prince Edward Island follows with an 8.2 per cent growth in spending this
year and 3.4 per cent in 2005. Nova Scotia is expected to see $1.01 million
in renovation spending in 2005, up just 1.3 per cent from 2004. Newfoundland
will see growth in renovations of 6.9 per cent in 2004, to $679 million and
a 5.5 per cent growth rate in 2005, according to CMHC. HB
