Challenging Canadian Real Estate Market, Covid-19 Put Focus on Home Renovations
Saturday Jan 15th, 2022
CHALLENGING CANADIAN REAL ESTATE MARKET, COVID-19 PUT FOCUS ON HOME RENOVATIONS
January 12th, 2022
A recent RE/MAX Canada report has highlighted shifting consumer trends in Canadian real estate, driven primarily by challenging market conditions and Covid-19. The 2021 Renovation Investment Report found more than half of Canadians renovated their home for personal enjoyment, not the perceived return on investment (ROI) that was the driver behind many renovation decisions in the past. Tightening market conditions from coast to coast and the “lockdown effect” of Covid-19 were factors in the shift.
RENOVATION TRENDS IN CANADIAN REAL ESTATE
- Three in 10 Canadians (29%) renovated for non-essential “lifestyle” reasons, such as recreation/entertainment projects.
- More than half of Canadians renovated their home in 2020 for personal enjoyment. Of them, 29% renovated to enhance lifestyle and 29% renovated for essential reasons, such as safety and maintenance.
- Only 16% of Canadians said they renovated to increase the market value of their home in order to sell within in the next one to three years
According to a Leger survey conducted on behalf of RE/MAX Canada in 2021, Canadians were increasingly looking for ways to improve their quality of life at home a year into Covid-19. “Lifestyle” had eclipsed financial gain as the top reason for renovating during the course of the pandemic. However, despite the trend of home renovations done for personal use and enjoyment, 59% of Canadians said they always consider the return on investment that a renovation will have on their home’s overall market value. While there is a current renovation trend based on lifestyle aspirations, practicality is never far from the surface.
This lack of inventory remained a continuing factor across Canada through 2021 and is expected to continue in 2022. In its Canadian residential real estate outlook for 2021, RE/MAX identified seller’s market conditions in 82% of regions, with a noted spike in demand for single-family dwellings putting additional pressure on already limited supply. In its 2022 Canadian housing market outlook, that number increased to 97% of regions.
More than half of survey respondents (55%) stated that they have already done or would like to do a home renovation within the next year. Of this group, 35% said they would opt for minor renovations, such as fresh paint.
RE/MAX brokers across Canada were also surveyed, and identified fresh paint and landscaping as two upgrades that yield a high ROI, despite being low-budget and minor in nature. This is in alignment with and good news for the nearly half of Canadians (47%) who said they would want to keep their home improvement budget below $10,000, even if the guaranteed ROI was at least 10%. Three in 10 Canadians (31%) would bump up their spending from $10,000 to just under $50,000, and only four per cent would consider spending more than $50,000.
Sixty-five per cent of RE/MAX brokers surveyed also claim that kitchen upgrades, including cabinets, countertops and appliances, yield the highest ROI for sellers, with 87% of brokers naming the kitchen renovation as the top home improvement resonating with buyers in the Canadian real estate market.
RENOVATIONS AND CANADIAN REAL ESTATE: REGIONAL MARKET INSIGHTS
In Western Canada, Calgary, Edmonton and Victoria, homebuyers want the move-in-ready experience, with homes that are already entirely renovated being most in demand. Given this, sellers in these regions have the potential to see a large return on their renovation investment. In Greater Vancouver, outdoor improvements are one of the optimal ways for homeowners to get the best ROI, with landscaping among the top five renovations to undertake. It’s also one of the most common renovations that homeowners in this region are taking on themselves, versus hiring a professional to do the work.
Throughout Ontario, RE/MAX brokers are reporting that listings are selling quickly, regardless of their condition or renovation status. Regions including Toronto, Ottawa, Hamilton-Burlington, Niagara, London and Kingston/Napanee saw a strong shift toward outdoor upgrades and amenities in 2020, specifically the addition of a pool or larger exterior living area. Much of this demand was prompted by COVID-19 and the desire for more recreational space within the home – a trend that is not anticipated to be a permanent one. Bathroom renovations and new flooring are highly regarded as yielding the best return on investment. Across markets such as Mississauga, Thunder Bay, London, Barrie and Ottawa, painting is noted by RE/MAX brokers as the top renovation that homeowners are doing themselves, as well as one of the best ways to also see an improvement on ROI.
In Atlantic Canada provinces, RE/MAX brokers also placed importance on upgraded kitchens, but noted flooring upgrades as one of the best renovations for homeowners to get optimal ROI in regions including Fredericton, Saint John and St. John’s. Meanwhile in Charlottetown, roofing upgrades and landscaping are two of the top renovations that can be done relatively quickly to improve ROI, along with painting, as echoed across nearly all regions surveyed. In Saint John, the finished basement is one of the most sought-after renovations by buyers and creating more open-concept spaces is noted as one of the top three ways for sellers to get the best return on their investment.
CONSUMERS’ UNDERSTANDING OF ROI
Only 51% of Canadians claimed to have a thorough grasp of the renovation process and nearly half either don’t know or disagree that they have the understanding needed to make ROI-enhancing renovation decisions. Furthermore, 50% of Canadians surveyed said they expect their REALTOR® to advise them on the right renovations to take on if they expressed interest in doing so when purchasing a home. This reliance on external professionals to guide home-buying decisions is anticipated to continue.
ADDITIONAL HIGHLIGHTS FROM THE 2021 RE/MAX RENOVATION INVESTMENT REPORT
When it comes to the renovations that yield the best return on investment, Canadians see these as the best renovations to undertake:
- 70% of Canadians state redesigning larger spaces, such as kitchens or washrooms;
- 56% of Canadians state minor updates, such as refreshing paint;
- 55% of Canadians state landscaping the outdoor space;
- 50% of Canadians state changing the home layout, including adding rooms or knocking down walls;
- 32% of Canadians state updating décor and furniture;
- 49% of Canadians prefer to contract out most or all of the renovation work; and
- 33% of Canadians consider themselves to be very capable when it comes to home renovations, and don’t need professional help.
About the 2021 RE/MAX Renovation Investment Report
The 2021 RE/MAX Renovation Investment Report includes data from RE/MAX brokerages. RE/MAX brokers and agents are surveyed on insights and local developments. Regional summaries with additional broker insights can be found at remax.ca.
Leger is the largest Canadian-owned full-service market research firm. An online survey of 1,540 Canadians was completed between February 4-7, 2021, using Leger’s online panel. Leger’s online panel has approximately 400,000 members nationally and has a retention rate of 90%. A probability sample of the same size would yield a margin of error of +/- 2.5%, 19 times out of 20.