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Honey, I'm planning to renovate the house

Globe and Mail - VIRGINIA GALT - May 22, 2008

Forty per cent of Canadian homeowners say they intend to spend $1,000 or more on renovations this year although economic conditions could cause some to scale back their plans, Canada Mortgage and Housing Corp. said Thursday.

"It all depends on how consumers are feeling confident with the economy," Julie Taylor, senior economist with CMHC's market analysis centre, said in an interview.

In any given year, there is typically a gap between intentions and execution with it comes to home renovations, Ms. Taylor said after CMHC released a survey, conducted in February, on the home-improvement plans of householders in 10 major Canadian centres.

Still, Ms. Taylor said, consumer sentiment in Canada continues to remain "pretty strong" in spite of the deepening economic crisis in the United States and soaring fuel prices.

"Close to $19.7-billion was spent on renovations in 2007 across the 10 major centres surveyed, an increase of more than $2-billion compared to 2006," Bob Dugan, CMHC's chief economist, said in releasing results of the survey, which polled homeowners in St. John's, Halifax, Quebec, Montreal, Ottawa, Toronto, Winnipeg, Calgary, Edmonton and Vancouver.

"As well, when Canadian homeowners in these 10 centres surveyed were asked about their plans for this year, 40 per cent indicated that they intend to spend $1,000 or more on renovations by the end of 2008."

Last year, 31 per cent of homeowners spent $1,000 or more on home renovations. When expenditures under $1,000 were taken into account, 37 per cent of Canadians spent money on home improvements, down from 39 per cent in 2006, CMHC said.

Ms. Taylor said she does not expect a major drop in home renovation activity this year, although some homeowners might modify their plans.

"We might see a slight decline. It might be 'instead of doing a full house, I'll just do a few rooms' that sort of aspect," Ms. Taylor said.

On the other hand, there could be a number of Canadians who decide that renovating their current home is a cheaper alternative to buying a new home this year, she said.

CMHC's take on the market is far more optimistic than that of home-improvement retailers, who have reported steep drops in first-quarter profit. Earlier this month, Robert Dutton, chief executive officer of hardware retailer Rona Inc., said consumers were suddenly looking less confident and were spending less on home renovations.

"The results for first quarter 2008 reflect the strong drop in consumer confidence in the country's economic growth," Mr. Dutton said on May 13 in reporting that first quarter profit plunged to $1-million from $9-million a year earlier.

"That's not something we have been noticing," Ms. Taylor said Thursday.

CMHC reported that 1.5 million households in the 10 major centres it surveyed completed renovations that cost an average of more than $12,800. Almost half reported that the cost was in line with what they had projected, while 37 per cent went over budget.

"Do-it-yourselfers" accounted for 31 per cent of the renovations in 2007, down slightly from 34 per cent in 2006, CMHC said. The survey found that 41 per cent contracted out the entire reno project last year, while more than a quarter of households engaged contractors to do some of the work.

"The main reason given by households across all 10 centres for renovating in 2007 was that they wanted to update, add value or to prepare to sell their home," CMHC said in its report.

The second most popular reason was that they couldn't put the job off much longer "the dwelling needed repairs," the report said.

"Close to a third of households in Ottawa stated that their home needed major repairs, the largest share across the 10 centres."

Renovations to increase the energy efficiency of homes remained popular in Halifax, where they accounted for 10 per cent of the projects, and in Winnipeg, where they accounted for 8 per cent. Overall, however, renovations to increase the energy efficiency of homes accounted for only 5 per cent of total renos.

CMHC reported that 31 per cent of householders remodelled a room, making this the most common form of renovation in 2007.

Painting or wallpapering accounted for 27 per cent of the home improvements and the installation of flooring or wall-to-wall carpeting was undertaken by 26 per cent of households.

The survey found that 19 per cent invested in new windows and doors, 17 per cent paid for major landscaping and 13 per cent had to lay out money for roofing and eaves troughs.

Renovation intentions for 2008 are strongest in Winnipeg, where 50 per cent of homeowners are planning projects, and in St. John's, where 48 per cent plan to invest in home improvements.

The survey also found that more than 40 per cent of householders who purchased a home in 2007 were first-time buyers, the same proportion as in 2006.

For those who previously owned a home, the majority of home-buyers, 74 per cent, purchased a home worth more than their previous residence, while 13 per cent purchased lower-priced homes, CMHC said.

CMHC said that in the 10 major Canadian centres surveyed, six per cent of households plan to buy a primary residence this year, down from the seven per cent that actually purchased a primary residence in 2007.

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