Ajax Pickering Real Estate Blog

Anne Howland, CanWest News Service

More than 1-million Canadian households renovated their homes last year, spending an average of $11,000 to update, add value or prepare to sell the residence, according to a new report from Canada Mortgage and Housing Corporation.

“More than $17.3-billion was spent on renovations last year across the 10 major centres surveyed,” said Bob Dugan, chief economist at CMHC. “As well, 46% of homeowners in these 10 centres surveyed indicated that they intend to spend $1,000 or more on renovations this year.”

Approximately 1.5-million households in 10 major Canadian completed renovations last year, costing an average of more than $11,000, according to the Renovation and Home Purchase Survey released Thursday.

The main reason for renovating in 2006 was to update, add value or to prepare to sell the residence (61%), CMHC said, adding that 30% of respondents stated that the main reason for renovating was that their home needed repairs. The top three renovations completed last year were: remodelling of rooms (34%), painting or wallpapering (32%), and hard surface flooring and wall-to-wall carpeting (32%), the report noted.

Close to half (47%) of households reported that the cost of renovations was in line with what they had budgeted, the report showed, while more than a third of households went over their planned budget for the renovation.

Twenty-four per cent of households that undertook a renovation project were do-it-yourselfers who hired a contractor for a portion of the work, CMHC said, while slightly more households contracted out the renovation work (40% of respondents) as opposed to doing the work themselves (34%).

The share of households who spent $1,000 or more on renovations in 2006 was the largest in St. John’s, N.L. at 37%, followed by Halifax at 36%, while a smaller proportion of households in Vancouver (30%) undertook renovations last year.

As for renovation intentions across the 10 major centres in 2007, they are strongest in Edmonton and Winnipeg, where 51 and 50% of consumers, respectively, indicated they planned to undertake renovations costing $1,000 or more this year, CMHC said. The share of potential renovators is lowest in Toronto and Vancouver, with 43% of households in each centre intending to renovate, the report added.

On the home purchasing front, eight per cent of households across the 10 major centres surveyed intend to purchase a home in 2007 that will be used as a primary residence, CMHC said. About half of the households that intend to purchase a home next year are first-time buyers, compared to 40 per cent in 2006. The majority of first-time buyers are between the ages of 25 and 34, with a household income between $80,000 to about $100,000, the report showed.

Home buying intentions are strongest in Calgary, where 14% of households reported that they are considering buying a home this year. Purchase intentions are also strong in Edmonton, where 11% of households plan to buy, while the share is lowest in Montreal and Quebec (six per cent), the report said.

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Every home sale on average generates $32,000 to economy

Eric Beauchesne, CanWest News Service

Penny Fortier estimates her family of four has spent about $12,000 on moving-related expenses, such as new appliances and renovations, since buying a home in Toronto six months ago.

Fortier, a real estate agent, acknowledges she got off light, at least so far. “We’re doing things slowly, so there’s definitely more spending coming down the road,” she says.

Roughly one in every 100 jobs created in Canada over the three years was due directly or indirectly to home sales, the report says, noting the job creation impact of home sales varies by region, just as spending does.

Wayne Martin, who along with his wife moved less than a city block in Ottawa to a single-family home from a townhouse, estimates his moving costs - including storage costs, new furniture, appliances, renovations, decorating, landscaping and repairs to his “new” home - are “well over” $30,000.

That may sound excessive, but it’s not, according to an industry study released Tuesday.

Each home sale on average generates a whopping $32,000 in additional consumer spending, the Canadian Real Estate Association says.

The findings, which may come as an eye-opener to many first-time homebuyers, highlights the importance of the housing industry in general, and the residential real estate sector in particular, to the overall economy.

The report also helps in understanding the concerns about the overall impact of the downturn in the U.S. housing market on that economy and, in turn, on Canada’s.

“Resale housing transactions across Canada generate significant economic activity,” says the report, which also notes that this activity generates employment in a variety of industries.

Home resales in Canada annually generated more than 158,000 jobs and an average of $15.3-billion in additional spending over the three-year period 2004 to 2006, it says. The increase in spending each time a home was purchased varied from region to region, ranging from a high of $40,450 in British Columbia to a low of $20,325 in Atlantic Canada.

The purchase and sale of homes generates fees to professionals - such as lawyers, appraisers, real estate agents and surveyors - as well as taxes and fees to government, and spending on renovations, and furniture and appliances, the report says.

“When Canadians move, they typically buy new appliances or furnishings, and renovate in various ways to tailor their home to their specific requirements,” says association president Ann Bosley.

And that spending has broad economic impacts, a major one being job creation, adds association chief economist Gregory Klump.

“The study shows more than 94,000 jobs are created in Canada each year as a direct result of resale housing transactions,” he says.

Nearly 40% of those jobs were in the finance, insurance and real estate sector, the report notes.

But jobs are also created indirectly and in a variety of industries, it says. Of the 158,555 average annual total direct and indirect jobs created in the 2004-06 period, 29% were in finance, insurance and real estate, 17% in professional services, including government, 16% in retail and wholesale trade, 14% in construction, 7% in manufacturing, and 16% in other industries.

Roughly one in every 100 jobs created in Canada over the three years was due directly or indirectly to home sales, the report says, noting the job creation impact of home sales varies by region, just as spending does.

The greatest impact is in British Columbia, where nearly one in 55 jobs created in the province over the three years was the result of home sales. The smallest impact was in Atlantic Canada, where homesales accounted for one in every 205 jobs.

The economic impact of housing has also increased over the 15 years, says the report, which is the fourth conducted for the association since 1991 by Altus Clayton and Clayton Research Associates of Toronto.

The level of moving related spending and the total number of jobs created has increased sharply over the past 15 years, it notes.

Spending per transaction has increased 30%, with the greatest increases being in expenditures on moving costs, up 131%, then renovations, up 68%, taxes 47%, professional services 18%, and furniture and appliances 15%. The only decrease in spending has been on general household purchases, which have declined 8% since 1991.

The annual level of job creation has tripled since the first study was conducted in the early 1990s, which followed the bursting of the late 1980s real estate boom.

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Garry Marr, National Post

Guilt aside, is there any real reason for a consumer to go out and seek a so-called green house?

We’re talking an environmentally friendly home, not an enclosed glass room with a bunch of garden vegetables growing inside.

The statistics show builders have not exactly embraced the idea of a green home, despite all the hype.

John Kenward, chief operating officer of the Canadian Home Builders’ Association, freely admits most of the association’s members are not building houses to the standard devised by the government in 1982 known as the R-2000 initiative.

To get a house certified as an R-2000, builders have to jump through a number of hoops like making the house energy efficient. That can mean natural gas appliances  and conserving water, among other things.

“It’s true probably much less than 1% of homes are built to the R-2000 standard,” admits Mr. Kenward.

That may sound pathetic but the truth is that houses have become more energy efficient over the past two decades and part of that is being chalked up to builders meeting consumers demands and mandatory building codes for such energy efficient items as thermal windows - all which can be traced back to the R-2000 initiative.

The federal government maintains that the R-2000 initiative has helped reduce energy use in the average Canadian home by 20% since the early 1980s.

“The data shows the way in which we build houses has changed dramatically and much of that change has come from technology that was part of the R-2000 program,” says Mr. Kenward. “I think of all the industries in Canada, housing is the closest to meeting up to the Kyoto targets.”

Peter Norman, an economist with Altus Clayton, a real estate research firm, said builders continue to say they are building to R-2000 standards but don’t bother to get certified. “My impression is there isn’t a stark contrast to a green house and a traditional home,” he says.

Mr. Norman said much of the green home is really just a matter of materials you are using and they keep getting cheaper with technology improvements. “I think home building has become more green almost in spite of itself, not because of the environmental process,” he says.

The real issue comes down to cost and how quickly the upfront costs can be recovered through annual energy savings. Mr. Norman says studies have shown the extra costs associated with green homes can add 5% to 15% to the final purchase price.

“It really depends how much you want to go overboard,” he says.

Add solar panels to your roof and get some of your energy from the sun and you may be able to impress David Suzuki but not your accountant. Solar panels are simply never going to pay for themselves, say most builders.

Brian Johnston, president of Monarch Corp., said over the years he has discovered consumers run when it comes to the final cost for extra features that might be considered efficient.

His company builds subdivisions but when a customer came to him and said he wanted a heating and cooling system that would be energy efficient in the long-term, he agreed to do it.

“We said we’ll do it at cost less 10%. We wanted to see how it would work out and then maybe do it for all our homes,” said Mr. Johnston. “When he saw the final bill he walked away. It really comes down to a question of cost.”

Don Lawby says buyers just don’t care about the issue. “I think it’s about to become an issue, at least that’s my feeling but not right now,” he says. “This has to start from the builder not from the consumer.”

His advice to consumers is not to look for something with a green tag but to be more practical and look at issues like how well a home is insulated and how much reusable material was part of construction.

“It’s still hard for an individual consumer to find a home that is environmentally friendly because it hasn’t been built that way.,” said Mr. Lawby. “Besides for most, it’s still about  location, location not green, green green.”

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