When Jessica and Ryan Lehr took the home improvement plunge last year – gutting an entire floor of their Collingwood, Ont., home – they joined thousands of Canadians each year who hire contractors or don tool belts to renovate their homes.
The couple's prime motivation for undertaking the work, Mr. Lehr says, was that "we want to stay in this house at least until the completion of our children's university education.
"We didn't do it to regain our return on investment in the short term. We wanted to do the renovation now to maximize our enjoyment of the house."
The Lehrs are not alone in this desire. Over the past decade, Canadians have invested an increasing amount in their residences, from installing energy efficient windows and appliances to building chefs' kitchens and spa-inspired bathrooms.
Canadians in total spent more than $71-billion on home improvement in 2015, or an average of $5,000 per household, according to Statistics Canada data compiled by the real estate consultancy Altus Group Ltd. That's an increase from $45-billion in 2006.
Annual growth in home-renovation spending is poised to once again outpace GDP this year, according to Altus. "Residential renovation spending is one of the largest segments in the construction sector in Canada," says Altus Group chief economist Peter Norman.
So, what is fuelling this key driver of the national economy?
It may be tempting to blame our renovation appetite on the Property Brothers, Mike Holmes or any of the other home renovation gurus on television. Instead, it can be linked to macroeconomic factors, Mr. Norman says. Chief among them is population growth driven largely by immigration.
The surge in renovation spending, at least prior to the 2008 recession, was propelled in part by an increase in the construction of single-family homes to accommodate the influx of new Canadians and those looking to upgrade their accommodation.
Single-family housing construction dwindled during and after the recession as rising land costs and development restrictions pushed developers to focus on multi-storey apartment and condominium development.
Historically low interest rates have also contributed to the consistent growth in renovation spending. As homeowners renew mortgages at lower rates, many invest the savings in their homes.
Canadian Real Estate Association chief economist Gregory Klump points to another factor influencing home-improvement spending: the skyrocketing cost of homes in Toronto, Vancouver and other big markets.
"Strong demand and tight supply is contributing to bidding wars and overall price gains," Mr. Klump says. "Faced with a shortage of homes available for purchase and strong competition for that short supply, many potential trade-up home buyers are deciding to renovate rather than move."
While renovation spending is forecast to grow by 1.9 per cent this year nationwide, in the red hot markets of British Columbia and Ontario the figure is 3.1 per cent and 2.8 per cent, respectively.
The good news, according to economists, is that growth in home improvement spending is not only largely sustainable – even when financed by debt – but generally bodes well for the long-term health of the Canadian economy.
"In a lot of households, people are becoming more cautious about adding additional debt, and we've seen renovation activity level off over the last year despite low interest rates and a rise in home values," says Scotiabank economist Adrienne Warren.
"Some of those renovation projects might be financed, but it doesn't appear that households are piling on debt. They seem to be taking a more cautious approach."
Indeed, Mr. Norman says that about 40 per cent of homeowners tap secure lines of credit for their renovations, while an additional 20 per cent pay for improvements by refinancing their mortgages. Over all, he says, it's money well spent.
"It's all capital spending, and those investments are good for our economy. If someone spends $50,000 on a new bathroom, by and large they've just invested $50,000 in their home. Whether they borrow for that or not it hasn't changed their net worth.
"We say there are about 800,000 jobs in Canada related to [the home renovation] industry," Mr. Norman continues. "Renovation spending is important and it's growing at a modest but continuously positive rate. It's fuelling jobs, and you wouldn't want to see a sharp downturn in the sector given the size of the work force that depends on it."