After the renovation craze of the past two years, home builders are left with nervous customers gripped by inflation and skyrocketing interest rates.
“People have turned around. Initially interest rates were low. All renovated, but the tide has turned,” observes Benjamin Tallard, developer of Montreal’s South Shore.
“I even have good clients who have the money who have had trouble making payments for six months,” he says.
He says that after the COVID-19 renovation craze, in which people lavishly spent to adapt to working from home, the repeated hikes in mortgage rates are having the effect of a cold shower on the industry.
According to the Association of Construction and Housing Professionals of Quebec (APCHQ), after a record year of spending of $23.5 billion last year, a 15% decline to $20 billion is expected in 2023.
“There will be a slowdown, that’s for sure,” confirms Régent Beauregard, owner of JRB Construction.
“The world is spending less because of mortgage rates,” agrees Guillaume Labrie, President of Construction Labrie.
Larger works postponed
The tide has turned for Michel Jodoin, founding president of Soumission Rénovation, which helps clients find good contractors.
Photo from LinkedIn
Cardinal Paul
Director of APCHQ
“You rarely have $250,000 in the bank on a big job. Often we do mortgage refinancing, which takes away creditworthiness and we have less money to renovate,” he analyses.
“As people have less money in their pockets, they’re more likely to do smaller jobs like painting themselves,” he says.
At APCHQ, we remind you that more than a third of households use financing to get work done for $5,000 or more.
“High inflation is eating away at household purchasing power,” confirms economics chief Paul Cardinal, who believes the ingredients are in place for a rare drop in home improvement spending.
“As much in housing as in small businesses, interest rates are cooling the eagerness of customers to renovate,” concludes Guillaume Houle, spokesman for the Quebec Construction Association (ACQ).
APCHQ is forecasting 46,000 housing starts this year, down 21% from last year. It could be the worst fall in 28 years.
A major setback for the industry
Fewer suggestions submitted by customers
- enlargement -45%
- masonry -36%
- landscaping -25%
- siding -17%
- Eat -14%
- basement, cellar -14%
- bathroom -10%
More contractors bidding on a project
- landscaping +84%
- masonry +80%
- Eat +45%
- bathroom +43%
- enlargement +28%
- siding +20%
- basement, cellar +5%
Source: Fourth quarter data, 2021 and 2022, SoumissionRenovation.ca
The end of a long period of progress
Expenditure on home renovations in Quebec
- 2015 12 billion dollars
- 2016 $12.4 billion
- 2017 $13.2 billion
- 2018 $14.3 billion
- 2019 $14.8 billion
- 2020 15 billion dollars
- 2021 $19.7 billion
- 2022 $23.5 billion
- 2023 (forecast) 20 billion dollars
Source: Statistical Institute of Quebec and Association of Construction and Housing Professionals of Quebec forecasts
Do you have any information about this story that you would like to share with us?
Do you have a scoop that might be of interest to our readers?