The Canadian Property Bubble Pushed Renovation Spending To Over 3% of GDP: BMO

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.

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  • Rob Turner 2 years ago

    In 2006, they called this the HGTV indicator. Life wasn’t even worth living if you didn’t have dark cabinets and granite counter tops.

    By 2008, all of America felt a little different about it.

    • David Chan 2 years ago

      Nature is cyclical. Canada didn’t get that obsession around 2008, and just got a feeling for it from Breaking Bad.

  • Omar 2 years ago

    I wonder how much of this is just a minor remodel to see if they can get a new tenant to pay the cost of their mega sized mortgage?

    • Jimmy 2 years ago

      Great point.

    • Naz 2 years ago

      This mega size mortgage will take people out of home to under the tree. Better Gov should take some step to solve the problem. I simply dont understand why these people are buying such 50% upside house price????

      Do you know how they are getting these mega size mortgage?????? Most of them don’t even have job. You don’t have job doesn’t factor mortgage broker will make documents for mega size job for you for 1% commission of your total mortgage and you are 1000% successful to get the mortgage.

      that’t how the house price increased to a such mega size!!!!!!!!!!! in my surrounding I believe more than 90% of Houses are buying/selling in this way. in conclusion NO job MEGA mortgage.

  • Haha 2 years ago

    With 1.3 new immigrants coming in people are turning basement into rental units.

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