By Aleksandra Oleksak, The Real Estate Chick
During the spring and summer months, it’s not uncommon to see someone on our street renovating their home. In the last 15 years this phenomenon has been on the rise and reached a record of $63.5 billion in 2013 and accounted for 3.7% of the Canadian Gross Domestic product. Employment growth has allowed a lot of homeowners to save up cold, hard cash for their renovations, while increasing home prices has allowed others to use their equity. But what is the driving force behind all of this? I share my thoughts below.
Pre HGTV, which came around in 1997, homeowners were unaware how outdated their homes were and how badly they wanted designer kitchens and washrooms. Post HGTV; people no longer just spent money fixing roofs or leaky basements, they wanted shiny and new, something that was more tangible which they could enjoy and show off. And the numbers proved it, with every 3 out of 4 renovation dollars being spent on real home improvement. It also does not help that those HGTV shows make it look so easy and fun.
Cost of Land Transfer Tax
With growing families, comes the tendency to want to move up the home ladder for more space and functionality. But homeowners are thinking twice before putting that For Sale sign on their lawn, once they calculate how much it will cost to purchase another home. The land transfer tax is a big deterrent for most people who still want to stay in Toronto. It’s money they have to pay up front and I’m still trying to figure out where the City is actually choosing to spend that money. Therefore most homeowners will choose to stay in their existing home and renovate as well as build additions for more space.
It’s no secret, the Toronto real estate market has been extremely competitive for quite some time due to lack of inventory for sale. If you’re even contemplating on selling your house to upgrade, you will have to enter the battlefield to find yourself another home. Although it’s a sellers market and you will receive top dollars for your home, you will also have to purchase for top dollars. Most people don’t want to go through that process and also take on a substantially higher mortgage. Therefore they are choosing to stay and renovate instead. This keeps on driving the seller market conditions nonetheless.
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With so many old and outdated homes in Toronto, renovations are here to stay. It helps drive our economy as well as our housing prices. It also revitalizes neighbourhoods that were once not so desirable. This trend is on the rise, but hopefully one day it will all balance out to make housing a bit more affordable in this great city of ours!
Aleksandra Oleksak is Her City Lifestyle’s “Real Estate Chick,” and a Toronto real estate professional with Sage Real Estate. As @RealtyQueenTO, her real estate blog has been named one of the top 50 real estate blogs in Canada.