With current construction costs creeping higher by 4-5% year-over-year, property prices are of course going to move higher. And justifiably, builders are going to pass down those increases onto us buyers.
Strikingly though, these increases do not even include the increases to land values on which these structures are built on.
So it should not come as any surprise that home prices in Ontario towns and cities have increased 8-14% year-over-year (as of September 2019.)
So what’s going on with these rising construction costs?
Here’s two major contributors that may not be on top of the news cycle:
1/ Labour shortages for skilled construction labour. With fewer and fewer younger people entering the trades, this puts upward pressure on the rates of in demand tradesmen.
2/ Material costs continue to jump across the country on nearly all building supplies needed.
Both of these items are helping to drive costs and in turn property prices. If these trends continue, home ownership (at any price deemed “affordable”) may be less plausible for many Canadians.
Great news if you already own real estate or operate investment properties; Not so much for those looking to get their foot in the market (regardless of whether they are renters or would-be first time buyers.)