Do-it-yourselfers and home renovation specialists will take up some of the slack in Canada's home sales and new construction market this year, according to Scotia Economics.

In its latest Real Estate Trends report, Scotiabank suggests renovation expenditures will increase by close to 10 per cent this year, largely offsetting the expected 10% per cent decline in housing starts. Low borrowing costs and the rapidly growing market for home improvements are helping to fuel the boom in activity.

"Given that a relatively large share of the industry's labour and materials are sourced domestically, the continuing strength of renovation spending is providing much needed support at a time when our export-oriented industries are facing intensifying competitive pressures from a strong Canadian dollar and lower-cost offshore producers," says Scotiabank senior economist Adrienne Warren.

"Homeowners are taking advantage of innovative financial products such as home renovation lines of credit and the ability to extract rising home equity through mortgage refinancing," says Warren. "Lifestyle trends such as 'cocooning' or 'nesting' and the advent of home theatres are also likely feeding the drive to renovate. At the same time, lacklustre returns on traditional equity and fixed-income investments are making home renovations a more attractive form of long-term savings for many households."

Last year alone, home renovation spending by Canadians rose 14 per cent to a record $28 billion, equal to two-thirds the total investment in new housing construction.

The rapid pace of existing home sales in recent years also bodes well for the reno industry, as most improvements and alterations are undertaken in the first three years after a resale home purchase. At the same time, rising home prices are likely making home renovations an increasingly attractive alternative to moving for many households.

Do-it-yourselfers are also boosting sales for home improvement retailers, who are piggybacking on the reno boom.

"This retail segment is now almost as large as the $24 billion market for furniture, appliances and home electronics, which itself is enjoying rapid sales growth, and larger than the $20 billion spent annually on clothing and footwear," says Ms. Warren.