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‘HGTV effect’ sends Canada’s renovation market to record highs

‘HGTV effect’ sends Canada’s renovation market to record highs

It may never match the affinity for Tim Hortons and hockey, but more Canadians appear to be developing a new pastime that involves hammers and trips to Home Depot.

According to a new report from Altus Group, home renovation spending in this country reached a record $63.4 billion in 2013 and is expected to keep climbing this year and next. That’s despite some economists’ predictions that Canada’s home renovation sector is slowing.

Altus says residential renovation spending has been on the rise over the past 15 years, and today represents about 3.7 per cent of Canada’s gross domestic products. That’s more than what’s spent annually on new residential construction, it says.

Driving the home renovation craze is the head-scratching continued rise in housing sales across Canada, driven in part by low interest rates.

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Another big factor is what Altus calls the “HGTV effect,” citing the deluge of home repair TV shows that started with the launch of HGTV Canada in 1997.

“Many homeowners did not know how badly they really wanted new designer kitchens and bathrooms until then!” the report states.

Higher house prices are also forcing many buyers to purchase cheaper properties that are in need of repairs. Buyers are also tapping into home equity lines of credit to finance their renovation projects, and taking advantage of government incentives offered in some provinces.

Altus Group says about one-quarter of the home renovation spending increase is due to growth in Canada’s housing stock, while three-quarters is the result of higher average spending per unit.

It says renovation spending per housing unit in Canada (for renters and owners) averaged about $4,600 per year in 2013-dollar terms, up from about $2,500 in the 1994-1998 period.

“The increase in average spending per unit is a combination of increased willingness and ability to undertake renovation work,” the report says.

“The good news for firms in the renovation sector is that we don’t foresee an end to the expansion trend in the near term.”

A CIBC poll released last year says Canadians planned to spend about $15,000 on home renovations in 2013. Not surprisingly, Albertans expected to spend the most ($22,900) on average, compared with $11,000 for those in Atlantic Canada.

That cross-Canada trend is consistent with the Altus Group report, which says Alberta, Canada’s richest province thanks to its oil industry, is expected to lead the country in renovation spending this year and next, with growth of 5 per cent each year.

The report says Ontario and Quebec combined still account for most of the renovation spending in Canada, or 2 out of every 3 renovations dollars coming from these two provinces.

British Columbia had the slowest renovation spending growth last year, the report notes, but predicts activity to pick up along with growth in its economy.

The Altus Group report on Canada’s renovation market is rosier than research from TD Bank released last fall.

While renovation spending has grown 7 per cent a year for the past decade in Canada, TD sees activity slowly due in part to rising interest rates and a lack of rooms left to refurbish.

“In 2015, the combined effect of higher interest rates, elevated household debt levels and a cooling in housing markets is likely to lead to a modest dip in renovation outlays,” TD Bank economist Diana Petramala noted.

“There will probably continue to be a significant share of remodeling projects. However, the recent string of new homebuilding and renovation spending has left the Canadian housing stock in the best condition in decades.”

Citing Statistics Canada data, Petramala said home renovations account for nearly 40 per cent of total residential investment today, up from 25 per cent in the 1990s.