Lumber, civic fees will drive home prices higher




Expect higher residential construction costs this year, experts say, because among other reasons lumber prices are starting to increase again and government fees are consistently rising.
Prices for oriented strand board (OSB), for instance, are currently at nearly US$1,100 per thousand square feet compared to about US$800 in February 2021. A typical framing package for a detached house of lumber and OSB was around US$17,500 when prices dropped in August 2021; it is now at around US$50,000, not far from the May 2021 peak of US$70,000.
“We used to always say the price of lumber is irrelevant,” Vancouver-based forestry consultant Russ Taylor told Canadian Mortgage Professional, “but now, lumber prices are basically triple where they should be, and housing packages are about triple where they should be.”
Those elevated prices for home framing packages were something to watch, Taylor said, compounding inflation pressures that are already hiking costs for other purchases essential to building and furnishing a new home.
“We’re going to be hitting higher than $60,000 [on home framing packages],” he said. “I’m not sure if we’ll go past $70,000, but obviously that’s a big bite with inflation and so forth affecting all other products in a home.”
Already, Canadian construction costs are rising quickly, partially due to breaks in the supply chain. Several Canadian markets have some of the highest annual rates of growth in hard construction costs in North America, according to global construction and property consultancy firm Rider Levett Bucknall (RLC).
The average increase in construction costs from 2020 through 2021 was 7.42 per cent, RLC noted.
In terms of percentage, the strongest construction cost growth in North America over the past year was in Toronto (up 13.25 per cent), followed by Calgary (10.28 per cent).
But if you dig into the RLC study, government fees are the main drivers of higher housing construction costs. Toronto, for example, has some of the highest fees in Canada.
In 2018, total fees in Toronto ranged from $165,000 per unit for high-rise condos and $206,000 for single-family housing. In 2021, Toronto reached $185,000 for a one-bedroom buyer in taxes and fees alone.