Construction costs up in first quarter

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Increases in building material cost, a driving force for increased construction costs.

Ottawa, ON — Construction costs were up across the board for every building type in the first quarter. Higher construction costs overall were mostly attributable to a shortage of construction materials, which led to higher month-over-month prices for softwood lumber (up 11.9 per cent) and veneer and plywood (up 20.1 per cent) in March.

Prices for residential building construction increased 5.6 per cent in the first quarter—the largest increase since the data series began in 2017, reports Statistics Canada. Non-residential building construction prices rose 1.5 per cent, led mostly by higher construction costs for factories and warehouses.

Ranging from a 1.2 per cent increase for office buildings on the low end, townhouses reported the largest gain with 6.9 per cent, following closely by single-detached houses (up 6.8 per cent).

Softwood lumber prices rose at their fastest year-over-year pace on record in March (up 118.9 per cent), partially due to low stocks following the temporary shutdown of sawmills during the first wave of the COVID-19 pandemic.

The demand for material continued to be high as building materials and supplies sold by wholesalers were up 19.1 per cent year over year in February, reports Statistics Canada. A surge in residential construction costs was spurred by historically low-interest rates and a desire for more living space during the pandemic. Investment in residential construction continued to rise—mostly due to growth in single-family home construction.

In Toronto, residential construction costs were up 7.2 per cent overall, led by a nine per cent price increase to build single-detached houses.

Non-residential building construction costs rose at the fastest pace for factories (up 2.1 per cent) and warehouses (up 1.8 per cent) in the first quarter. It was also up in every city covered by the survey, with prices rising at the fastest pace in Ottawa and Montréal (up 2.4 per cent and 2.0 per cent, respectively).

The building construction price index is a quarterly series that measures the change over time in the prices that contractors charge in the building construction sector. It features 11 census metropolitan areas, including St. John’s, Halifax, Moncton, Montréal, Ottawa–Gatineau (Ontario part), Toronto, Winnipeg, Saskatoon, Calgary, Edmonton and Vancouver.

Construction costs increased the most in Calgary, Toronto, and Ottawa, on a year-over-year basis. Residential building construction costs rose at the fastest pace in Calgary (up 16.8 per cent), Toronto (up 15.0 per cent) and Ottawa (up 14.6 per cent) in the first quarter.

Residential building construction costs rose at a record year-over-year pace in the first quarter, mostly due to limited supply and increased demand for building materials.

Construction costs for a single-detached house accelerated from a 4.4 per cent year-over-year increase in the third quarter of 2020 to a 14.6 per cent rise in the first quarter of 2021.

Non-residential building construction costs increased 2.1 per cent year-over-year, led by Ottawa (up 4.9 per cent) and Montréal (up 4.4 per cent).

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