Altus Group says renovation spending will fall sharply this year

According to Altus Group, there will be a 5.2% drop in renovation spending this year. And we are talking about a segment larger than new home construction. The main reason for such a decrease is the COVID-19 pandemic.

Peter Norman, chief economist at Altus Group, predicts a nationwide spend of $76 billion, which is down from $80.1 billion in 2019. He says the home renovation sector almost stopped during the first months of the pandemic. As a result, the total spending was down by 23%. The sector’s activity has recovered after the provinces reopened. The main drivers of the rebound were homeowners stuck at home waiting to fix issues or modify their properties for a work from home possibility.

Meanwhile, the report points to a weakening consumer confidence. Many homeowners are just not ready to take on extra debt for renovations today.

“Renovators are quite busy now,” – Norman noted. “But if your year starts with five months of a 23% decline, and then you start recovering, your possibilities of growth are limited.”

Although the national economy can’t bring renovation spending to 2019 levels, Altus expects a return to $80 billion next year. The report says three quarters of the sector is driven by discretionary upgrades, and not by necessary works. Last year, secured financing, e.g. HELOCs, accounted for 60% of all borrowing for renovations.

Altus also surveyed homeowners on their renovation plans. It turns out 16% of respondents plan to renovate this year, while it was 20% in 2019. The poll shows 7% of owners are planning to buy in 2020, which is only 1% less than last year.

Norman believes there are many reasons why Canadians may want to renovate. Aside from the psychological pressure homeowners feel being stuck at home, the current low interest rates make it an attractive idea for those who can afford more debts.