With many Canadians finding themselves working predominantly from home over the past 16 months, many are looking to invest in home renovations sometime this year. However, when it comes to the housing market, fewer Canadians are setting home ownership as a goal, according to BMO’s latest Real Financial Progress Survey.
The survey, conducted by Ipsos, found:
- Renovations are on the rise, with 62 per cent of Canadian homeowners planning a home renovation this year. When looking at specific cities, homeowners in Toronto are the most likely to invest in home renovations at 63 per cent followed by those in Montreal and Vancouver (59 per cent and 58 per cent, respectively).
- 44 per cent of Canadians indicate that they plan to spend more on home renovations than they did the year previously. Close to half (47 per cent) plan on using cash to pay for the renovations; turning to a credit card or line of credit are two other options cited by respondents (24 per cent and 16 per cent, respectively).
- With the state of Canada’s housing market and buyers expecting prices to rise, some Canadians are hitting pause on homeownership plans. Only 22 per cent pointed to homeownership as a financial goal, which is down 3 percentage points from January of this year.
“We have seen a lot of change unfold in the housing market since the beginning of the pandemic – record low interest rates, incredible demand, and a significant rise in people working from home. Taken together, it is incentivizing existing homeowners to invest in their current home instead of looking to move,” said Hassan Pirnia, Head, Personal Lending and Home Financing Products, BMO Bank of Montreal. “For Canadians planning renovations, it’s helpful to speak with a financial planner or mortgage advisor to come up with a budget and make sure that long-term savings aren’t touched. Our teams are also focused on helping first-time buyers get into the market. We are working with them to provide tailored plans and have resources available like affordability calculators and online pre-approval to help them understand what they can afford.”
Savings surplus
The pandemic has afforded some Canadians the ability to tuck away a healthy amount in excess savings. According to the survey, Canadians fall into two camps when it comes to their plans for using that money:
- Savings camp: Over a third of Canadians are earmarking the money for savings. 36 per cent said they would use the money to boost their retirement savings, and 34 per cent plan on putting the money towards an emergency fund or savings account.
- Spending camp: On the other side, some Canadians are looking to spend with vacations topping the list (31 per cent). 29 per cent plan on using the money they tucked away for home improvements, a quarter plan on using the money to invest in the stock market, and 15 per cent are going to put the money towards the purchase of a car.
For homeowners planning renovations this year, BMO offers the following tips and advice:
- Solidify finances and stick to a budget: Renovating a home can be costly. When planning a renovation, it’s important to have a budget in mind and to stick as closely to that budget as possible while avoiding dipping into longer-term savings. There can also be unplanned costs once the renovation starts, so a good rule of thumb is to set aside approximately 15 per cent of the total renovation cost as an emergency fund. For a flexible lending option to help, consider a BMO Homeowner ReadiLine. It provides quick access to funds and the flexibility to draw down on the equity that has been built up in the home.
- Look to improve home value: When looking at renovations, it’s a good idea to think about how they will improve the value of the home. Typically, kitchen and bathroom renovations will have the best return on a home investment. To help with home value, do the due diligence on any contractors and sweat the small stuff with materials and finishes.
- Renovate to give (and get) back: With renovations that make a home more efficient, homeowners can now start to get money back. The Government of Canada’s Greener Homes Grant offers homeowners grants of up to $5,000 to make energy efficient upgrades such as improved insulation or roof panels, high-efficiency water heaters, and solar panels. As well, qualifying homeowners can also receive up to $600 to pay for an EnerGuide home energy evaluation.
SOURCE BMO Financial Group