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Thursday, April 4th, 2024

Alberta renovation spending to lead country 1.7% growth in 2011, 4.9% in 2012

Interior designer Karen Hall

Interior designer Karen Hall showcases the European style of the renovations in her Wildwood home. Photograph by: Ted Rhodes, Calgary Herald

CALGARY — Renovation spending in Alberta is forecast to lead the country in year-over-year growth this year and in 2012, according to a report by the Altus Group, an economic consulting firm.

The report said spending in Alberta on renovations hit $5.7 billion in 2010, which accounted for 9.5 per cent of all spending in the country. Total spending in the province was up 7.2 per cent from the previous year which was behind many other provinces for annual growth.

Canada saw 9.2 per cent growth in 2010 to $60.1 billion.

Altus Group forecasts spending to increase in Alberta by 1.7 per cent this year and by 4.9 per cent next year — both growth rates leading the nation.

For Canada, the report forecasts a 0.1 per cent decline this year followed by a 3.6 per cent hike in 2012.

“Canada’s general economic recovery continues, but at a modest pace,” said the report. “Job growth has been stronger through the recovery than after the last recession, but still suffers from weakness, particularly in terms of youth and full-time jobs. The cautiously optimistic forecast for economic growth translates into equal caution over the forecast for renovation demand.

“The good news for renovators is that weaker than expected economic growth has extended the period of very low interest rates, perhaps into 2012. Low interest rates are important for this sector both in terms of affordability for those who need to borrow to finance their renovations, as well as in keeping mortgage payments in check, thereby freeing up income for discretionary renovation spending.”

The report said that last year one in three homeowners took advantage of the Homeowner Renovation Tax Credit getting back an average of $700.

Improvements accounted for about three out of every four renovation dollars in 2010, with repairs the remainder.

Research conducted by Altus Group for the Canadian Real Estate Association found that the average MLS transaction in Canada generates about $9,400 in incremental renovation and repair spending within three years of the purchase.

According to the Calgary Real Estate Board, year-to-date up to the end of May, single-family MLS sales of 5,835 units were up 0.67 per cent compared with the same period a year ago but condo sales were down 10.84 per cent to 2,386 units.

Sano Stante, CREB president, said there will be a gradual shift to more of a seller’s market as the inventory of homes for sale diminishes in the second half of this year.

“I think we’re going to see continued confidence in the economy and the real estate market,” he said. “And as we begin to see more in-migration towards the end of the year, that’s going to be realized in increased sales in the real estate market.”

Robert Kavcic, an economist with BMO Capital Markets who joined Stante in a real estate panel discussion in Calgary on Friday, said the city’s real estate market outlook is positive relative to other major centres across the country.

“Valuations relative to income have actually already come down quite a bit from 2007. Prices are still five per cent below peak levels,” said Kavcic, adding Calgary is cheaper in comparison to other markets like Toronto and Vancouver when looking at the housing price in relation to income.

“The other factor is that we’re expecting much stronger economic growth in Alberta versus Canada as a whole and that’s going to drive in-migration flows again and demand for housing.”

© Copyright (c) The Calgary Herald

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