The condo market in Canada’s largest cities has been fluctuating heavily in price and sales. One of the biggest impacts on the condo market is the cost of constructing developments. With remarkably high material prices and the lack of labour, construction costs in Canada are expected to increase drastically in 2021.

According to the 2021 Canadian cost guide released by Altus Group, construction costs in the Greater Toronto Area will experience the largest price increase of 5 percent. However, it could potentially halt between 3 and 6 percent. They also predict a rise in Vancouver of 2 to 4 percent, with Ottawa and Montreal rising slightly more at 2 to 5 percent.

Currently, the costs of building high-rises (12 to 60 storey buildings) are highest in Vancouver, coming to roughly $340 and $360 per square foot. The next highest costs are in the Greater Toronto Area, which are slightly lower but have a more varied cost difference of between $315 and $380 per square foot. In these two cities, it costs on average $75 more per square foot to build a high-rise building than anywhere else in Canada (Dingman, 2021).

So, what is causing these construction cost increases?

Since the beginning of COVID-19, commodity prices such as wood, concrete, and steel have increased immensely. These goods are essential for constructing a building. As they increase, the profit margin for developers decreases rapidly.

Lumber prices are currently the highest they have ever been. Depending on the type of wood, prices have increased from 30 to 40 percent to 200 to 300 percent. Since last year, some of the price changes are as follows:

• Two by fours have increased from $3 to $10
• Plywood has gone from $35 to $112
• Oriented strand board increased an unbelievable 500%, from $300 per 1,000 square feet to $1,800 in just one year.

Steel is a commodity that has been heavily impacted globally. Steelmaking costs have increased by approximately $200-250 per ton, due to increased input costs. Over the past few months, the diminishing supply of steel increased prices. Now that COVID-19 is stabilizing, demand for steel is increasing once more. As this happens, another hike in steel prices could be on the horizon.

Costs are also increasing due to the lack of labour. One of the most crucial trades for building high-rises is formwork. This process involves creating a temporary mold to pour concrete in and have it solidified. Developments were experiencing scarcity in this field even before the pandemic hit. According to Shane Dingman from the Globe and Mail, formwork costs can make up to 25 per cent of the total cost of building a high-rise. Since 2015, formwork costs have doubled (Dingman, 2021).

With increasing commodity prices and labour issues, construction costs are expected to continue rising. As costs increase, some developers will need to either increase the price per condo unit, or cancel their ongoing projects altogether.

Dingman, S. (2021, April 14). Condo construction hammered by rapid rise in costs. The Globe and Mail. https://www.theglobeandmail.com/real-estate/article-condo-construction-hammered-by-rapid-rise-in-costs/.