Over the past two years, the housing market has been unusually turbulent. After months of skyrocketing home prices, rising interest rates have taken hold and sent prices on a downward trajectory. According to the Canadian Real Estate Association (CREA), the national average home price decreased by 9.9% between October 2021 and 2022.
While reduced housing prices may be good news for prospective buyers, this trend may be cause for concern for those looking to sell their home. But while the real estate market fluctuates, doing minor, strategic renovations may help improve your home equity and offset falling home values.
“Home renovations can add value to a home even in a shrinking market,” says Mike Heddle, broker and team lead of The Heddle Group at Royal LePage. “Typically, renovations will increase the value of a home. They can always be a great investment.”
When it comes to investing in home improvements in an unpredictable market, however, the best renovations tend to be small ones that homeowners will enjoy and can afford without going into debt.
Home improvements that add the most value
When it comes to increasing home equity, relying solely on inflation can be unreliable, especially over the past year when the real estate market has experienced unprecedented fluctuations.
However, making small improvements to keep your property up to date can be a great investment if done properly, and can make your home more attractive to potential buyers.
Small renovations in key areas, such as the kitchen or bathroom, or improvements that enhance the curb appeal of the property, tend to yield the greatest returns.
Examples of small projects that can make big differences in your home’s value are:
- Updating garage doors
- Repainting walls and cabinets white or a light colour
- Updating light fixtures
- Replacing bathroom fixtures and/or old vanities
- Removing outdated window treatments
Financing a home renovation
Another key consideration when thinking about renovating your home in today’s economy is the cost of contractors, materials, and interest rates. When deciding to embark on a renovation project, homeowners should choose projects they can complete without having to open a new line of credit.
“When people are thinking about making investments, with lumber on the rise, or borrowing costs. . . that’s certainly something that should be taken into consideration when you’re looking at your household budget,” says Heddle.
Although inflation has driven up the cost of certain materials like lumber, the current economy has also resulted in less competition for appliances and contractors, making now a good time to renovate your home.
Although housing prices are falling, doing some small tune-ups to your property can help offset this. Whether you’re planning on selling your house immediately or in the future, renovations done strategically are almost always a good investment.
When renovating, don’t forget about home insurance
Because renovations typically increase the value of your home, they also have the potential to increase your home insurance premium.
Your home insurance provider wants as accurate a figure as possible of what it would cost to replace your home. If you recently redid your kitchen, that could raise your home’s replacement value and subsequently, your premium.
That said, the opposite can also be true. If you renovated your roof and went with a material that’s maybe more expensive but will significantly lower the risk of weather damage, this could actually lower your premium.
This is why it’s important to notify your home insurance provider before you undertake any home improvements. You also want to make sure you have the appropriate liability coverage if there are workers inside your home completing the renovations. It’s important, too, to make sure your contractor provides proof of adequate insurance coverage.
“When you’re making an investment in your primary residence,” says Heddle, “we typically see those investments pay dividends in the long term.”
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