B.C.'s hot housing market is providing more business - and challenges - for home-renovation companies.

High prices, low interest rates, the 2010 Winter Olympics, aging homes, and high consumer confidence are motivating homeowners to renovate the kitchen, enlarge the bathroom, install new floors or get other renovation work done, say renovation and real estate industry insiders.

As a result, Canada Mortgage and Housing Corp. (CMHC) is predicting renovation investment will increase 8.5 per cent in B.C. this year and soon exceed new-home construction spending.

"I don't recall, in the last 20 years, seeing a market like we're seeing now," says Don Schultz, president of Burnaby-based Shell Busey's HouseSmart Renovation Centres.

Bayne Stanley, Business Edge
Don Schultz, president of Shell Busey HouseSmart Renovation Centres, knows firsthand just how busy the sector has become.

But he and other renovation company operators fear they might not be able to keep up with demand for their services.

CMHC forecasts predict B.C. will experience the biggest increase in renovation spending in the country at 15 per cent.

The federal agency that monitors real estate and construction activity across Canada predicts $5.43 billion will be spent on renovations in B.C. this year.

Schultz, who has been in the renovation business since 1979, calls the demand "pretty unprecedented from my point of view.”

He adds that increased home equity means increased demand for services.

"Renovations are more feasible for more homeowners because the equity in their existing homes has gone up and their neighbours' homes have gone up (in value)," says Schultz. "They're more comfortable putting money into their homes and being able to get it back."

Contrary to what you might expect, most homeowners are renovating and staying put rather than fixing and selling their homes, because they know the neighbourhood and enjoy living there, says Schultz.

"Most people look at spending their money on their home when they move into it," says Schultz. "A lot of them will tie it right into their mortgage, factoring in that they're going to allow so much money for (the renovation.)" Last year, Schultz's company did $8 million worth of business while operating out of centres in Burnaby, Surrey and Kelowna. Projects ranged from handyman jobs to $400,000 renovations.

The firm, formerly known as Delco Renovations, changed its name three years ago after Schultz arranged a deal with national home-improvement expert Busey, who hosts his own radio show across Canada.

Schultz expects annual revenue growth of 10 to 20 per cent over the next few years. But the high demand also spells more headaches.

"We're definitely seeing an increase in costs in the marketplace - both in material and labour," says Schultz, adding he expects them to keep going up in the next two or three years.

HouseSmart employs 20 project consultants and "100-plus" carpenters, labourers and tradespeople on staff as as subcontractors.

Like most other renovation companies, it's facing competition for skilled labourers from larger companies completing 2010 Winter Olympic-related projects such as the RAV rapid transit line, Sea-to-Sky Highway expansion and Vancouver Convention and Exhibition Centre expansions.

"(The Olympics is) taking a lot of the workers that could be working in the residential end of things and are working on the megaprojects (instead)," says Schultz.

High gas prices and traffic congestion add to the cost crunch.

HouseSmart does not charge for travel to jobs, but high fuel prices require the company to pay workers more to maintain their standard of living. And, the longer it takes to get to a job, the fewer jobs that can be completed.

Schultz's firm is part of the Shell Busey Referral Network, a website operated by Busey that lists renovation companies according to their specialties.

The network consists mostly of B.C. companies and some listings from Alberta and Ontario. Busey plans to make the network a national service.

"I'm so busy in more ways than I can imagine," says Roman Leppert, owner of Coquitlam-based A.S. Hardwood Floors, whose company is listed on the referral network. "It's too much work right now."

Leppert, who has been in business for 14 years, installs and refinishes hardwood floors. He estimates "maybe just 10 per cent - no more" of his customers are renovating homes for the purpose of selling them, while his firm's business is evenly split between renovations and new construction.

"Hardwood floors make a difference in the (home's) price, for sure," says Leppert.

CMHC senior market analyst Cameron Muir says renovations are on the rise due to a number of factors: Low interest rates that allow homeowners to re-mortgage or obtain a line of credit; a large number of homes built 25 to 40 years ago that now require repairs, alterations or improvements; and a lack of land supply in Vancouver, Victoria and Kelowna's core areas.

People would rather stay in mature neighbourhoods than move to outlying areas, he says.

B.C. leads the country in renovations largely because of aging homes and increased economic output in the form of more jobs and higher wages, says Muir.

In 2006, CMHC predicts, B.C.'s renovation spending will reach $6.1 billion and exceed forecasted new-construction investment of $5.8 billion, which will be down slightly from this year's $5.2 billion.

Lack of demand is not causing the decline, Muir notes. Developers and builders are finishing projects before starting new ones and land prices are high in Vancouver, Victoria and Kelowna.

Philip Hochstein, executive vice-president for the B.C. Independent Contractors and Business Association, which represents 600 large, medium and small construction companies, says uncertain costs and labour shortages pose more risks for companies that specialize in renovations - and other builders.

"(The increased risk) means better scheduling, better manpower placement, turning down jobs you don't have resources for," says Hochstein. "So it's a challenge to meet your customers' demands."

Hochstein says his group and other construction organizations are trying to train people faster and more precisely according to what they need.

"It's unprecedented," says Hochstein about the demand for renovations and all other construction projects. "I've been around construction for 18 years. I've never seen the industry this buoyant - and not only buoyant in British Columbia, but across the country."

In the late 1980s and early 1990s, he says, it was easy for B.C. to lure construction workers from Ontario, because times were slow there, "but now everybody is busy."

He says demand for renovations is high "because the economy is going so well" and two-term Premier Gordon Campbell has adopted "underlying fundamental policies" which have created more investment confidence and more jobs.

"You don't renovate your house if you think you're going to lose your job next week," says Hochstein.

Web Watch: www.housesmartcentre.com

(Monte Stewart can be reached at monte@businessedge.ca)