$50B+ industry
By Cody Winchester, National Post
Residential renovation spending in Canada weathered well the twin storms of financial crisis and domestic recession, but strong growth into 2010 will be tempered by new taxes and rising interest rates, according to an Altus Group housing report.
Renovation spending -- the aggregate of spending on home alterations, improvements, conversions and repairs -- slowed a bit during the market shock of late 2008 but soon picked up where it left off, rising steadily through 2009 and into first-quarter 2010, the report says.
Renovation was a $54-billion industry in 2009, accounting for about half of all residential construction spending. Home improvements accounted for three of four renovation dollars spent (the other went toward repairs).
Altus credits the Home Renovation Tax Credit for much of the market's health. Under the program, a homeowner received up to $1,350 in tax credits for $10,000 spent on renovations.
Existing home sales are up, too, and this has also given the renovation sector a boost. What's the first thing you do before selling a home -- or after buying one? You renovate -- whether that means finishing an unfinished basement or landscaping the front lawn.
To reinforce this point, the report cites separate Altus research for the Canadian Real Estate Association, a study that estimates the average home sale generates about $15,000 in renovation and repair spending within three years of purchase.
It's not all good news, though. The report also noted some challenges ahead for the home renovation sector. The renovation tax credit ended in January, and the consulting group predicts a concomitant fall-off in renovation spending. "It is clear that much of that incremental activity was 'pulled forward,'" the report says, "and, as such, a decline in spending following the program's termination is inevitable."
It also mentions the new federal Harmonized Sales Tax, which Altus estimates will create $1-billion in new renovation taxes, further depressing the market.
Altus projects renovation spending in 2010 to rise 6.6% from the previous year, to a total of $58-billion, before declining 3.2% in 2011 to $56-billion.
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