Renovations driving Canadian residential-construction investment

Posted on March 12, 2018

It appears trades had a busy final few months of 2017 as residential-construction investment across Canada recently soared. It was largely on the shoulders of increased renovation spending, Statistics Canada suggests.

Investment in residential construction hit $34.5 billion in the final quarter of 2017, an increase of 9.2 per cent, or $2.9 billion, from that time in the previous year, according to the national statistics agency’s “Residential construction investment, fourth quarter 2017” report. Of that increase, reno spending accounted for the largest share. Some 41.8 per cent of all residential-construction investment was directed towards renovations.

Nationally, residential-renovation investment in the fourth quarter of 2017 rose by 6.4 per cent, equaling $862.6 million of the $2.9 billion total. Ontario was in front in terms of annual gains. Reno spending was up $1.1 billion in the province for an 8.8-per-cent rise.

Alberta, where reno spending dropped $224 million, was the lone province to record a decrease. “This decline can be partially explained by the completion of renovation projects following the Fort McMurray wild fires in 2016,” the report states. Alberta was also the only province in which apartment-building construction fell, dropping by $7.3 million.

However, recent data from the Canada Mortgage and Housing Corporation suggest that residential construction looks to be “normalizing,” at least according to BMO Senior Economist Robert Kavcic. In a client note published this month about January numbers from CMHC, Kavcic suggests the province’s annualized rate of housing starts—which represents when work begins on a dwelling—of around 25,000 to 30,000 is “consistent with population flows.”

Meanwhile, in Ontario starts, which were mostly concentrated in the Greater Toronto Area, skyrocketed to an annualized rate of 107,000 units. “Note that Toronto starts jumped to the highest since at least 1990, but all of the gain was in condos,” Kavcic writes.

In terms of acquisitions costs, another category Statistics Canada puts under the residential construction investment umbrella, an increase of $437.9 million was observed in Q4 2017. That represents a 12.4-per-cent rise over the same period last year. Acquisitions costs include costs associated with acquiring new dwellings. These can include sales taxes, development fees, for example. These costs accounted for more than a tenth of overall residential construction investment.



Photo credit: Mark Turnauckas