Many homeowners affected by the housing bubble in Canada have decided to renovate their homes instead of buying a new one. This has led to enormous growth in the home reno industry. However, CIBC has conducted a new survey which suggests that most Canadians are improving their homes through landscaping and other outdoor renovations which do not add much value to their homes. The study shows that most Canadians do not move because they cannot afford to upgrade to a larger home.
The shift of renovations from indoors to outdoors is also an indication that many people in Canada have spent a lot of money renovating their living spaces and have not turned their attention outside. Most homeowners focus on renovating the interior of their houses because they need to increase the value of the house and improve their living conditions. When they renovate exterior structures e.g. the roof and the walls, they start renovating their landscape to make their homes attractive. According to the Altus Group, Canadians spent about $70.1 billion on renovations, and the cost could rise over the years.
According to a survey conducted by Angus Reid between May 19 and 25, 2016, about 2,129 people (54% of the respondents) online were asking about renovations plans. Most of these people were looking for basic maintenance projects. When the same survey was conducted back in 2015, the total respondents were about 55% which was a higher figure. Landscaping had about 42% respondents in 2016 unlike 25% in 2015. It is therefore evident that most people are jumping into landscaping after they are done renovating their house’s interior. Landscaping, patio and deck renovations are very common, and it is an indication that most homeowners have turned their attention outside.
A CIBC survey backs the Angus Reid survey. CIBC reported that an average renovation project in 2016 costs about $13,017 while in 2015 it costed about $12,293. This is an indication that demand has increased, making the renovation cost to rise. The survey further reported that only 33% of the respondents were renovating their bathrooms in 2016 unlike in 2015 where 40% of the interviewees were renovating their bathrooms. This further shows that most people have already renovated their bathrooms, kitchens, ceiling, floor and walls in their homes. Since most of the people renovating their homes today are not doing it as an investment, their renovations are therefore focused on making their lives better rather than overall return. The current renovation market is mainly driven by housing prices.
Ideally, there are very few detached homes for sale in Toronto, and this has increased the demand and the price of buying a home in Canada. If you cannot afford these homes, the only option is to renovate the one you live in. For instance, in Alberta, the renovation cost of an average project has risen from $13,520 in 2015 to $22,951 in 2016 making it have the highest cost of renovating a home.
However, in British Columbia, an average renovation project had dropped to $15,522 in 2016 right from $16,639. This shows that location may determine how much you pay for a renovation. This could be due to the availability of materials, homes and living standards. In Alberta, there are very few detached homes for sale, and hence, most people will have to renovate the ones they own. This translates to a rise in renovation costs in such areas.
Real estate boards in both Toronto and Vancouver have cited that there are very few homes on the market. In fact, in May 2016, the prices of detached homes in Metro Vancouver rose with about 36.9% costing $1,523,800 when compared to 2015. On the other hand, in Greater Toronto area, home prices rose by about 18.9% to cost $986,691 during the same period. When demand increases and there is a limited supply, the prices of commodities increases.
With the current house market, most people are not selling their homes because of the risk and uncertainty involved in buying a new one. Hence, most homeowners are worried about selling their homes, pay land transfer tax, pay commission and incur the cost of moving to another home which may not be better than the one they own. A renovation is the better option to most people, and hence market prices of houses continue to rise.