Home renovation spending heats up again after COVID-19 pandemic led to deep freeze
Lines of credit a popular way to fund renovations, including for home offices
After rising to a record high last year in Canada, spending on home renovations fell off a cliff in the early days of the COVID-19 pandemic.
But the months of lockdowns and the seemingly endless purgatory of working from home have Canadians once again opening up their wallets to make their temporary workplaces as tolerable as possible.
In a recent report, Toronto-based real estate consultancy Altus Group calculated that Canadians spent more than $80 billion on home improvements last year, a tally that outpaced growth in the overall economy.
And the year's home reno boom was especially impressive, considering that the sector shrank by more than five per cent the year before.
"If we go back to last spring, interest rates were tumbling, so we were riding quite high," Altus Group's chief economist Peter Norman said in an interview with CBC News.
The $80.1 billion that Canadians spent on fixing up existing homes last year was more than they spent on new ones — and it was a big reason why businesses that tailor to that market were feeling hopeful that 2020 was going to be another strong year.
Then COVID-19 struck — and just as the pandemic had a negative impact on almost everything else in the economy, it brought that spending to a grinding halt. What was shaping up to be a strong year for renovations cooled off completely in March and April.
Altus Group is now forecasting that after a record 2019, spending on home renovations will fall in every province this year.
Norman said there's a delay of a few months in the data, so only now is there some sense of what sort of activity was taking place in May and June. But it seems that all those months cooped up at home compelled Canadians to move ahead with home reno projects they either weren't planning before or put on pause in March and April.
That's no surprise to Melanna Giannakis. As a branch manager with Meridian Credit Union, she said the activity at her branch in Fonthill, Ont., a community in the Niagara region of southern Ontario, mirrors the trends that Altus is seeing across the country: booming demand, followed by a complete deep freeze and now a resurgence.
Line of credit debt grows to pay for renos
Much of that activity is being paid for by homeowners borrowing against the equity in their property to tailor their house to the new reality of their lives.
"At the beginning of the pandemic, the annual growth rate of home equity lines of credit doubled and nearly tripled for personal use," Giannakis said in an interview.
Some of that money was likely used to pay the bills as incomes fell and job losses added up in the early days of March and April.
But a lot of it has been going to pay for home renovations.
"One of the main things I'm finding is people are less concerned about where they are living and more concerned with how they are living," Giannakis said.
The massive rise in the number of people working from home has changed the game for real estate, as millions of Canadians are now less tethered to downtown offices. That's leading to a real estate boom in remote, less dense environments.
Those staying put in urban centres want to spend money to make their homes better suited for them in the new reality, Giannakis said.
"People want more room and more space — home offices with nice backdrops for video conferencing, for example, home gyms, finished basements, backyards pools.... They want their own little hideaway they can hunker down in."
It's not just a Canadian trend, either. Bank of Montreal economist Sal Guatieri noted in a recent report that after plummetting in March and April, U.S. consumers are spending more than ever on their homes again. In June, spending on household furnishings, equipment and maintenance eclipsed $650 billion US in June and is now back above its pre-pandemic level.
"Telework has already spurred spending on home comfort," he said, especially for one type of renovation: home offices. "Demand for in-home office renovations looks to have risen sharply."
That's not to suggest that homeowners are spending willy-nilly. Norman cited Altus data showing that the number of homeowners planning renos costing at least $5,000 has declined compared with last year, but it's still rising from its March low.
While indications are that the reno market is recovering strongly, the decline was so steep that even with the current boom, it's unlikely that spending in 2020 will come out ahead of last year's strong pace.
"We do expect things to be a little bit subdued this year relative to the last year," Norman said.
"We just won't see that same rate of growth."