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Why Do Residential Construction Prices Keep Soaring In Canada?

Canadian home builders have been facing increasing material and labor costs for months now. According to a recent report by Statistics Canada, the building construction price index made a record climb in the second quarter of 2021.

Prices spiked significantly, even in comparison with the construction of non-residential buildings. The prices for hot housing markets such as Ottawa and Toronto were among the fastest-growing.

Statistics Canada details that the annual growth at the national level was 18.8% for the second quarter of 2021. The following table shows the rate at which construction prices of residential buildings increased in different areas.

AreaPercentage Of Cost Increase
Calgary31.4%
Ottawa28.4%
Toronto22.4%
Edmonton22.4%
St. John’s21.5%
Saskatoon20.7%
Moncton16.2%
Winnipeg14.5%
Halifax14.1%
Montreal13%
Vancouver8.9%

Non-residential prices have also surged but not at the same rate as housing costs. Commercial building construction saw prices jump 3.7% in the second quarter of 2021. As compared to last year, prices are up by 5.7%. Based on the numbers put forth, more than half of the increase over the past year was in the most recent quarter which means growth is accelerating.

In this blog, we have discussed the factors that have fueled the continuous cost spikes in the Canadian construction industry.

Shortage Of Materials

The year-over-year increase stated was the largest ever reported. This is due to a low domestic lumber stock caused by a temporary shutdown in early 2020 due to the COVID-19 pandemic.

The constant mill closures and reduced output was soon followed by a high demand for lumber products in late 2020 and early 2021. The shortage of materials affected the overall cost for residential and non-residential buildings in all parts of the country.

Just in the first three months of 2021, costs jumped by 16.8 percent in Calgary. Moreover, the demand for materials continues and the prices for supplies sold by wholesalers keep surging.

As a result, the value of residential construction investments in Canada has reached a new record level every month since September 2020.

Increased Lumber And Wood Prices

The supply shortage has caused lumber, veneer, and plywood prices to skyrocket. Statistics Canada reports that between March 31, 2020, and March 31, 2021 softwood lumber prices rose by an astounding 118.9 percent in Canada. Moreover, structural steel has risen from US$550 per ton to close to US$1,000 per ton.

Lumber prices have been a main concern for the construction industry. Experts believe that the inflationary costs of all construction materials will continue throughout the year and that there is a chance that there is going to be a tail on these costs in 2022.

This has, unfortunately, increased the rate of theft at construction sites. As compared to 2018, theft incidents have risen, with some construction sites having been hit three or four times with losses up to $3000 per theft.

Delayed Projects

The Coronavirus-induced lockdowns have caused major project delays and disruption in the supply chain. This has led to increased labor costs and costs of warehouses adding to the final cost of projects.

Moreover, due to the lockdown, there has been a loss of productivity resulting in a slowed material delivery system costing the contractor an additional 0-12%. That is roughly the equivalent of profits and administrative overhead on most jobs.

In addition to this, warehouse prices have also increased adding to the overall cost.

About Us

BelVan construction is a premium construction company in Alberta, Saskatchewan, & BC. We are qualified commercial general contractors based in Edmonton. We have offered various business experts general contracting, project design-build, pre-construction consulting, and construction management services since 2011.

Right from the start, our primary focus has been on providing our customers with premium yet affordable construction and renovation services in a respectful, responsible, and reliable manner. In each of our retail construction or renovation projects, our goal is to make the clients’ needs our top priority with a commitment to providing excellent all-around service.

To get in touch with Edmonton’s leading commercial general contractors to build yourself an effective and productive commercial space, click here.

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