Walking around certain neighbourhoods in the City of Toronto, it seems like there are more dumpsters parked in driveways than cars. And that renovation boom is going to help keep the local – and national – economy chugging along, according to at least two different sources.
Flippers and Fixer-Uppers
In a report on global real estate trends, Scotiabank’s senior economist Adrienne Warren writes that “Canadian homeowners remain enthusiastic renovators” to the tune of a projected record $53-billion in spending in 2015. Her report points out that “a large share” of that spending was by people looking to flip their homes, and recent buyers looking to improve the property they just purchased.
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Warren cites a few factors that should keep the renovation world working at a steady pace, including low interest rates which are expectedly to stay that way for the foreseeable future, and low gas prices, which leave consumers with more disposable income in their wallets.
Ontario and British Columbia – and the cities of Toronto and Vancouver in particular – are where Scotiabank sees the biggest demand for renos. Saskatchewan and Alberta are two provinces cited as likely to feel “constrain[ed] renovation demand,” with the latter of course taking a hit from tanking oil prices.
In its Fall 2015 Housing Market Outlook for the Greater Toronto Area, the Canada Mortgage and Housing Corporation (CMHC) projects a slowdown in housing starts in 2016 and 2017, to 35,950 and 32,000 new units respectively, both below the recent average of roughly 37,000.
The agency also expects high prices to lead to a drop in the number of resale homes after what should be a record-breaking total in 2015.
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Boomers Lead Building Projects
But the CMHC also feels home renovations, adding basements apartments in particular, will be strong in the coming years. At its annual Toronto Housing Outlook Conference in early November, CMHC experts said that there are two different demographic groups that it expects to heavily invest in basement renovations: baby boomers in their late 50s and early 60s, and first-time homebuyers aged 24 to 44.
According to the CMHC, boomers are the fastest growing demographic group in Ontario, projected to account for nearly one-third of all households by 2017. They’re also the most affluent. And as retirement approaches – and their children start having families of their own – they’ll use their money to create basement entertainment rooms to host their grandkids in, or convert them to apartments for the young families to live in while they try to break into the housing market themselves.
For first-time buyers, the rental income from basement apartments will help them meet their mortgage payments.