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Homebuilding cost has “never been higher”: RBC

July 4, 2023

Residential construction costs in Canada have increased 51 per cent since the first quarter of 2020, outpacing the 13 per cent gain for the consumer price index, Royal Bank of Canada economists said in a report published June 28, 2023.
“The cost of building a home in Canada—or any structure for that matter—has never been higher,” the economists said in the report, citing “dramatic jumps” in concrete and structural steel prices since the start of the pandemic along with soaring lumber prices in 2021 and early 2022.
The increase in building costs comes as Canada grapples with high home prices and rents, an immigration-driven population boom, and shortages of workers and raw materials — all of which are adding to homebuying challenges.
The elevated costs have contributed to a decline in new home construction in the past two quarters. That’s a problem because population growth is accelerating.
Labour costs have soared during a period of high job vacancy rates within the building industry, according to RBC economists. Wage growth in construction was 9.4 per cent last year, more than double the pace of other industries, they said.
“In the near-term, a lull in homebuilding and the resolution of production issues at cement plants are likely to ease pressures to some degree,” the report said. “We expect housing starts to dip 10 per cent this year across Canada, which should temporarily soften demand for materials.”
But RBC warns that “ramping up homebuildingover the medium to longer term will keep costs elevated.”



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