Canada’s housing boom isn’t just home sales — it’s consuming the whole economy. BMO senior economist Robert Kavcic crunched home renovation numbers for Q1 2021. The bank found household spending on renovations hit a new high last quarter. Spending in this segment is growing so fast, it now represents a record share of the economy.
Canadians Spent $76 Billion On Home Renovations
Canadians spent an astronomical amount of cash on renovations while they were stuck at home. Renovation spending reached $76 billion annualized in Q1 2021. The run rate, or usual amount, is historically around $60 billion, according to the bank. It’s 25% higher than typical dollar volume, and the highest level ever recorded. If it seems like a large number, that’s because it’s bigger than the GDP of Luxembourg.
Home Renovation Hits Over 3% of Canadian GDP
Residential renovation spending grew much faster than the general economy. Home reno now represents 3% of GDP, a record share. This segment is about a third of the residential investment we discussed yesterday. Not surprising the larger category pushed to a new record.
Boost In Spending Thought To Be due To Lockdown and Exuberance
A combination of pandemic lockdowns and housing exuberance are behind the trend. “The reasons are pretty well documented: When you have to stay at home, you probably want to upgrade it; when you can’t travel, you have extra disposable income; and when you buy a new house or cottage (as Canadians are doing in spades), it probably needs some tweaks,” said Kavcic.
Most factors driving this trend are thought to be temporary boosts that will reverse in time. Home sales are forecast to moderate over the next few months, as pulled forward demand catches up. The reopening of the economy will also have people leaving the house more often. Once they start to realize there is a life outside of the house, they might stop spending so much on the house.
Like this post? Like us on Facebook for the next one in your feed.