Canada is poised to welcome around half a million new immigrants annually for the next ten years. By 2035, the Canadian population could hit 43 million, a 13% increase in current population of 38.3 million. This rapid growth in population will not be met by the low growth in housing starts and will result in increasing challenges to housing. This will impact consumer behavior, shifting towards renovating existing homes rather than upgrading to larger ones to accommodate family expansion. The impact of higher interest rates is already evident in the housing market, with buyers who secured low rates steering clear of upgrading to avoid taking on higher interest payments.
According to a survey of 1,500 Canadian carried out by Abacus Data, almost 1 in 2 Canadians have already done or are planning to do home renovations during the pandemic, and almost 25% have already done some upgrades (Abacus Data, 2021).
For Canadians who own a home, almost 1 in 3 have already done renovations (30%) or 25% are planning to (Abacus Data, 2021). Rates are higher in rural communities since the home ownership ratio here is higher compared to urban or suburban communities.
Personal enjoyment and functionality are top drivers for home renovations. 8 in 10 Canadians want renovations for comfort so that they can relax in their home, while 9 in 10 Canadians want their home to be multifunctional (Abacus Data, 2021). The closure of gyms, offices, and recreational centers during the pandemic may have led to this desire. Half of the people surveyed also look for an increase in their property value through home improvements.
Canadians are diversifying their investment across their homes. The drivers are a combination of personal functionality through the construction of multipurpose spaces, and future profit through investments in home upgrades (Abacus Data, 2021).
Home renovation market shows no signs of slowing down even after the pandemic:
A recent survey conducted by Homestars, Canada’s largest network of verified home service professionals, has shown that Canadian homeowners are investing more of their cash into home renovations despite a challenging year marked by the ongoing global pandemic, a heated national real estate market, inflation, and economic uncertainty. The trend is expected to continue to rise over the next 12 months, despite economic concerns (Homestars, 2022).
Due to the high cost of homes in Canada and an increase in flexible work arrangements, there has been a noticeable shift from buying homes to renovating them, homeowners are choosing to stay in their current property and improving it rather than trying to find a new property in this volatile housing market. And this trend is expected to continue without any signs of slowing down.
In 2020, the Canadian home improvement industry was estimated to have generated around $52.5 billion in sales (Statista, 2022). Building centers and big box stores were the most popular destinations for Canadians to spend their money, with market shares of 46% and 26% respectively (Statista, 2022). The Canadian home improvement sector saw an average growth rate of 1.3% between 2015 and 2020 (Olivia Bush, 2023). The market value of home improvement stores in Canada is estimated to be CAD $25 billion, there are approximately 2,269 home improvement companies operating in the country, employing 88,879 people (Olivia Bush, 2023). Home Depot and Lowe’s are the largest players in the market, with Home Depot generating CAD $8.8 billion in sales in 2019, and Lowe’s coming in second with CAD $7.1 billion; 41.8% of Canadians chose Home Depot as their preferred retailer for home renovation projects (Statista, 2022).
According to Homestars, spending on home renovations increased by 66% from February 2021 to June 2021 (Homestars, 2021). With people being home more often, they use the extra income they saved not traveling on home improvements.
Renovation trends in Canadian real estate:
According to Innovation, Science and Economic Development Canada, there are three main types of home renovations.
Survey conducted by Leger on behalf of RE/MAX Canada in 2021 found that approximately 29% of Canadians carried out renovations for lifestyle purposes such as leisure or entertainment projects. Over half of Canadians conducted home renovations in 2020 for their own enjoyment. Out of those, 29% renovated to upgrade their lifestyle and another 29% renovated for crucial reasons such as safety and maintenance. Only 16% of Canadians stated they renovated to boost their home’s market value with the intention of selling within the next 1-3 years.
Pandemic restrictions continued to influence how and where Canadians spent their renovation dollars over the past 12 months. Many Canadians are seeing the benefits of renovating important areas of their homes, such as bathrooms and kitchens. For those who are not willing to spend a lot of money, simple interior painting is a popular option. On average, indoor renovations cost around CAD $13,000, an increase of nearly CAD $5,000 from the previous year. The most common indoor renovation was painting, with 43% of renovators opting for this. Outdoor renovations cost an average of $6,622, with landscape design being the most popular upgrade, accounting for 29% of total spending.
