If you are amongst Canadian homeowners considering a second mortgage or home equity loan to finance renovations to you existing home you are amongst good company. According to a recent report by Scotia Economics – ScotiaBank’s economic research arm – there has been a marked increase in home renovations over the past decade, “as rising employment and incomes, alongside increasing household wealth (including housing
wealth) have encouraged home equity withdrawals and fueled a boom in renovation activity.”
Scotia Economic’s report also points out that, proportionally, resale homes have consistently held their values and have “commanded greater price increases from
buyers over the past decade than have new home builders.” While “the average cost of a new home increased by just over 50%” between 2000 and the first half of this year, “over the same period, the average price of a resale home more than doubled.”
The report’s author, Scotiabank economist Adrienne Warren, notes that over the past decade “housing reinvestments have added value to the existing stock of resale homes.”
Ms. Warren points out that because homeowners have consistently reinvested in their existing homes “the typical Canadian resale home likely contains more updated and sought-after features which would account for some of the rise in average selling prices.”
Particularly in urban areas, where there is a paucity of open land for new home construction, leveraging existing home equity through a second mortgage to make home improvements, is in effect a reinvestment in a tax-free asset that has paid off – and should continue to pay off – for Canadian homeowners.
