Three reasons why Canadians spend big money on basements
Basement renovations popular as Canada discovers ‘The World Down Under’
By John Bleasby
An analysis of 2016 renovation projects by the national referral firm TrustedPros gives insight into the type of work and the budgets assigned to a wide range of renovation projects across the country, region-by-region. One interesting finding was the popularity of basement renovations. Although second overall in popularity to bathrooms nationally (#1 in Alberta, Saskatchewan and Manitoba), basements led the country in terms of planning budgets at over $17,500!
We face nearly six months of winter in most parts of Canada, followed by another six months of poor ski conditions. It’s not likely the trend toward basement renovations is going to slip below the surface anytime soon. The TrustedPros study doesn’t tell us specifically the type of work done or why, however one can assume there were three main reasons.
Reason #1: If you build it, they will come…and they will stay!
High house prices in major metropolitan areas, longer career trajectories, delayed marriage; there are a host of reasons why millennials are staying at home longer, or even moving back. Statistics from the USA probably bear a resemblance to what is happening in Canada: more young people today are staying/moving back than in the last 70 years, four in 10 in 2015 according to a Trulia study published in the Wall Street Journal.
Transforming the paneled rec-room of the ‘60’s into viable living space for a mature family member means more than moving the ping-pong table into storage and adding a pull-out couch. It means a full washroom where there might have only been a toilet and sink, dividing up space for privacy to allow separate bedroom and living spaces, maybe even adding an office area for those millennials who are increasingly working from home. And a private entrance is a good idea too.
Reason #2: Rental Income to meet the mortgage
Younger families today struggle to find the down payment to buy their home. Despite low lending rates, many who are successful then struggle to meet the mortgage. There are HGTV shows (you know, the guy with the teeth!) focusing on a rental income option for the basement and what they propose is true; Adding a rental apartment to a home can, in many cases, create income sufficient to pay the costs of the improvement loan and some of the monthly homeowner obligations. In fact, TrustedPros estimates an ROI between 50% to 75% for basement improvements in terms of added equity.
However, the work required is more extensive than just creating private living space for a relative. A tenant will expect separation, and that means a self-contained unit with a kitchen of its own, perhaps a laundry facility, and one if not two bedrooms. Then there is the issue of storage; where does one put all the stuff that used to live in the basement?
This more expensive and comprehensive renovation requires higher levels of finishing too. Since the idea is to provide income to meet borrowing obligations, making the space really attractive impacts the rental income potential.
Reason #3: Rec-rooms have changed with the times
A generation ago, the basement rec-room was a poorly insulated, wood panelled room with maybe a dart board, the ping-pong table referenced above, or perhaps a billiard table….if the basement was finished at all! Sometimes the TV console was down there too, along with a record player for the kids.
Today the world is far more sophisticated. Yes, homeowners want comfort space, but a theatre-type home entertainment experience is more like it. Think huge flat screen, some basic bar facilities like a sink and fridge, and of course those glorious reclining theatre seats with drinks holders. And let’s not forget fitness! How about an area for the computerized stair-climber or stationary bike, and some yoga mats? Perhaps a putting green? The options are virtually unlimited, and so are the budgets. Making one’s home one’s castle has never had so many possibilities.
Contractor opportunity: Design/Build packages for the ‘World Down Under’
One thing the TV shows have right is this: the ability of a contractor to provide full design-build option packages is important for tapping into the world down under, a world in which more and more Canadian are willing to invest. Just showing up with a quote to build someone else’s design may limit your opportunities in this lucrative area.
follow John on Twitter @john_bleasby