Survey finds Canadians turning more to cash to fund home renovations

TORONTO - An Ipsos Reid survey suggests Canadians are less likely to use credit cards to pay for home renovations this year than they were in 2008, with more than three-quarters of respondents expecting to pay cash rather than increase their debt.

The survey, conducted for RBC Royal Bank, finds 76 per cent of respondents plan to pay for their home improvements with cash or savings. That's up from just 70 per cent who said they'd pay in cash last year.

Conversely, fewer people say they'd use a credit card to finance their renovation. The number dropped to 24 per cent this year from 32 per cent in 2008.

Canadian consumers have been amassing debt for years and levels are now much higher than in the past, forcing some to change their spending and savings habits to reduce their financial risks in a weak economy.

The survey contacted about 3,000 Canadian home owners in September. About two-thirds of them say they plan to renovate within two years.

The average amount that the renovators expect to pay this year is $11,272.

Almost half of the respondents (47 per cent) say they have done more renovations because of a federal tax credit announced in January.

The tax credit was one of several measures announced in the past year by Finance Minister Jim Flaherty in response to the recession that began a year ago as a result of a global shortage of credit.

The credit crunch was sparked by the failure or near-failure of several major U.S. financial companies and spread throughout much of the world's banking system, requiring several countries to bail out banks, insurance companies and lenders.

Canada's banks turned out to be among the most stable in the world, and none of them required a direct government bailout, but the impact was felt in rising unemployment as companies cut back or failed during the downturn.

"It's not surprising that Canadian renovators are getting smarter with their renovation financing and avoiding debt in light of the current economy," Marcia Moffat, RBC's head of home equity financing, said in a statement.

"Whether they plan to fix up and sell or renovate and stay, most are taking advantage of tax credits and incentives. They're also planning to use cash or lower interest credit to finance those renovations."

The online survey was conducted between Sept. 8 and 16, 2009. It's based on a randomly selected representative sample of 3,120 adult Canadian homeowners of whom 2,050 plan to renovate within the next two years.

The results are considered accurate to within 1.8 percentage points, 19 times out of 20.