High building costs are pushing up already stratospheric real-estate prices in many parts of the country, and also discouraging some developers from starting on new construction
Exorbitant construction costs for residential real estate across much of Canada are exacerbating the country’s housing affordability crisis and creating maintenance and insurance headaches for homeowners.
Lofty home building expenses are trickling down to both buyers and owners. For those hoping to buy a home, high building costs are pushing up already stratospheric real-estate prices in many parts of the country. They’re also discouraging some developers from starting on new construction, complicating efforts to ramp up home building and ease the country’s current housing shortage.
Not everyone agrees on the exact magnitude of those increases, which are notoriously tricky to gauge. David Schoonjans, senior director of development advisory at real estate firm Altus Group, said data collected by his company on construction costs for condominiums shows a lower overall increase, with appreciation rates moderating after the pandemic.
The higher construction costs are contributing to higher prices for new buildings, which, in turn, also affects the value of existing homes, as “they’re all selling into the same market,” Mr. Schoonjans said. Insurers are feeling the pinch as well. It’s not just that pricier materials lead to higher claim costs: The scramble to line up workers can both push back and raise the cost of major repairs covered by insurance or of rebuilding a home after an accident or natural disaster.
For some households, though, a bigger risk lurks. In some cases, it’s possible that sky-high costs have pushed the price tag associated with rebuilding a home after events such as a devastating fire or flood beyond the owner’s coverage cap.
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