After reaching record highs in 2019, Canadian spending on home renovations declined drastically in the early days of the COVID-19 pandemic. But following months of lockdown and with remote work still in place, Canadians are now looking to make improvements to their homes once more. And they’re willing to spend quite a lot doing so.
Canadian residents spent more than $80 billion on home improvements in 2019, according to Altus Group, a figure which actually outpaced growth in the country’s economy for the same period.
Last year’s increase in home reno was particularly significant, as the sector previously declined by more than 5% in 2018. Additionally, the billions spent on fixing up homes last year ended up being more than what Canadians paid to own new homes. With this in mind, many businesses in the home improvement market assumed 2020 would be another big year for their industry.
But COVID-19 had other plans, bringing consumer spending to a halt and impacting most of the Canadian economy. By March and April, spending on home renovations had significantly declined.
Borrowing Increases for Reno Projects
As there is a delay of a few months in relevant data, insight into what happened in May and June is only now becoming clear. Based on the most recent numbers, it seems Canadians have moved ahead with the home reno projects they put on hold, or haven’t even been planning on doing pre-pandemic.
Some financial institutions have reported similar trends, starting with strong demand for loans earlier this year, followed by everything being on pause and now an increase in demand again.
Homeowners across the country are borrowing against their property equity to make the desired changes to their homes, often as a result of the new reality resulting from COVID-19.
Pandemic-Related Home Renovations
The pandemic has prompted many people to look for more space, or space that is used differently, which is likely what’s driving current real estate sales and home renovation projects.
With millions of people now working from home, the housing market is seeing more activity in remote, less densely populated areas, as day-to-day commutes aren’t as necessary. Those who plan to remain in cities are looking to spend some money to make their homes better suited for living, working, learning and spending leisure time in the same space.
Things like home offices, finished basements, home gyms and backyard pools are more in demand now, as people spend most of their time at home.
Still, it appears that homeowners are trying to be careful with their home reno spending, as Altus Group data shows fewer Canadian homeowners are planning improvements that cost more than $5,000 compared to a year ago.
Even though the home reno sector has picked up, experts forecast that overall spending in 2020 will decrease in every province compared to last year’s record numbers. Specifically, the largest drops are expected in Quebec (6.4%), Alberta (6.3%), Ontario (5.6%) and Saskatchewan (5.2%). Renovation spending in the Atlantic Provinces and Manitoba is not predicted to decline as much, at 3.7% and 3.6%, respectively. Of all provinces, BC will likely see the smallest decrease at 2.3%.
U.S. Sees Similar Patterns
Canada isn’t the only country which saw an uptick in the home improvement sector during the last few months. In a recent report, Bank of Montreal economist Sal Guatieri noted that U.S. consumers are also spending more on home renovations than before, even after the dips recorded in March and April.
In fact, spending on household maintenance, furnishings and equipment surpassed $650 billion in the U.S. this June, which is now above pre-pandemic levels.
It’s great news that the Canadian reno market is starting to make a significant recovery. But with the steep decline earlier this year, even a strong end to 2020 might not be enough to exceed last year’s pace. However, experts predict things should return to normal in 2021, since reno spending in the country is expected to pop back up to around $80 billion.