Your questions, our answers | Are renovations chargeable?

Residential renovations have been going well for the past two years. However, with the rising cost of materials, can we still make a capital gain on a property whose work has cost a lot of money? Also, does the real estate overheating compensate for these high prices?

Emmanuelle Mozayan-Verschaeve
special collaboration

You thought that the increase in renovation costs was 20%… Well, that’s very optimistic, according to the general manager of the Corporation of Property Owners of Quebec (CORPIQ), Benoit Ste-Marie, who rather evokes a increase of about 45% (44% between March 2019 and March 2022, according to Statistics Canada). “It has been like this since the spring of 2020, because we decided to spruce up our homes since we had to stay at home. The pandemic has therefore generated an irrational craze for housing. People wanted a nice office at home, started expanding or building huge houses, having a long-term vision, but renovating everything. »

He explains that the difference in cost increases is considerable between small construction sites and larger, highly structured ones, where the increase is less (18%, according to Statistics Canada), because the workforce migrates. Indeed, she deserts small projects to work on bigger ones, because they are more interesting.

“So it’s a real problem to find a contractor,” says Benoit Ste-Marie.

“The other reason comes from the prices of materials, which are also much higher due to a lack of stocks,” he adds.

Result: either the site takes longer than expected, or the missing materials are replaced by other products, but the latter are more expensive than those originally planned in 75% of cases.

Reflection and planning

As the price of real estate is very high and renovations are also expensive, the final investment can be colossal, which implies that the gain will probably not be advantageous if you sell quickly. This is therefore not the time to renovate to speculate, unless you do the work yourself, even if here again, we must take into account the increase in the price of materials.

“You have to think twice before starting renovations today for questions of money and availability. This necessarily requires good planning to ensure that the products are in stock and that we will have the necessary manpower in due time,” continues Mr. Ste-Marie. He adds that contractors are so busy that they sometimes ask their customers to buy the materials themselves, which is time-consuming and more expensive, since the general public does not benefit from the discounts granted to professionals.

A wind of hope

The real estate market is growing, values ​​have increased, but it is impossible to know if it will continue, stagnate or decline.

“On the other hand, I see that in terms of construction, there are so many needs in certain sectors and these new properties will be so expensive that it will support the renovation market”, specifies the general manager of CORPIQ.

For his part, Jean-Philippe Cliche, senior economist for the Association de la construction du Québec (ACQ), notes that since North American central banks have decided to tighten credit conditions by raising interest rates leaders, the prices of building materials are falling. “In fact, after a first quarter where prices were very high, lumber prices are currently falling, and this should continue for the rest of the year, and also in 2023. steel and base metals, while the Bank of Montreal also foresees decreases there in the second half of the year and in 2023. That said, prices will remain higher than before the pandemic, but the decrease will be welcome and will certainly slow inflation and rising construction costs. »

According to Statistics Canada’s Industrial Product Price Index (IPPI), which measures the variation in the prices of the main products sold by manufacturers doing business in Canada, here are the data on lumber, paint and doors and windows in April over the last three years.