Nationwide Homebuilding Costs Soar 51% Amidst Population Spike
Costs for building homes have increased by 51% as Canada accommodates population growth that has set records. According to a report released by the Royal Bank of Canada, the price gauge has been trending upward since the first quarter of 2020.
A crisis in housing affordability is also plaguing the nation, and the best way to address it is by building more homes. As the nation would need to build an estimated 5.8 million homes by 2030 to address the affordability issue, it is obvious that this is easier said than done. A goal that has proven to be difficult, made more so now that building a home is more expensive than ever.
According to the economists’ report, “the cost of building a home in Canada — or any structure for that matter — has never been higher,” as lumber prices, structural steel prices, and concrete prices have all increased significantly between 2021 and early 2022.
You might be wondering what is causing the rise in construction costs . There are a number of contributing factors, including:
- Unprecedented population growth: A record-breaking 1,050,110 people entered the country in 2022 alone.
- Over 100,000 skilled workers are lacking in the construction industry alone in Ontario.
- Development charges are expected to rise by up to 46%.
- Materials are now more expensive; since 2020, the costs of concrete and structural steel have increased by 55% and 53%, respectively.
The Canadian government is attempting to address the housing shortage by modifying the Express Entry Pools’ immigration policies and accepting skilled trade workers. To entice Canadians to work in construction, additional government incentives have been put in place.
It would be detrimental to the environment to significantly increase cement (or other material) supplies. Growing the production of lumber in particular, as the damage done by this year’s forest fires is already beyond repair.
At the same time, the recent two quarters’ declining new home construction have been a result of the elevated construction costs. When the population is growing rapidly, this is a problem in particular.
While there is a housing shortage in the nation, the situation is made worse by rising home construction costs. The demand for materials will also increase as housing starts rise, pushing up prices. Because the cost of building a home directly affects the price of homes and, in turn, the cost of rent, it follows that purchasing a home will only get harder.
Message for investors.
Over the past ten years, home prices have risen nationwide as a result of rising population and skyrocketing housing demand. Canada welcomed a record 1 point 05 million new residents in 2022, and Statistics Canada estimates that if population growth keeps up, the country’s population will double in about 26 years. indicating that the cost of purchasing a home is unlikely to reduce significantly.
Now is a good time to think about real estate investments, given the upward trend in population growth and the numerous other factors driving up home prices. Pre-construction investments are a great way to get into the market now and start seeing a return on your money after a few years. Get in touch with one of our GTA-Homes Platinum Agents today to gain insightful market knowledge and determine whether purchasing a condo that is still under construction is a good fit for your financial objectives.