The cost to build a home in Canada increased at levels not recorded since the second quarter of 2021, a trend that could be supported by higher fuel and labour costs.

According to new data released by Statistics Canada, residential building construction costs grew 5.6% quarter-over-quarter in Q1-2022, the highest increase on record since Q2-2021. Between the 11 census metropolitan areas (CMAs) covered in the Statistics Canada report, residential building expenses rose 22.6% yearly in Q1-2022. This surpasses the 21.9% high reported in Q4-2021.

Calgary, Edmonton and Toronto experienced the highest yearly price growth rates, where construction costs leaped between 31.4% and 26.5% over the course of a year.

The vast majority of the 11 CMAs recorded larger quarterly increases than the previous two business quarters. Building a residential home in Calgary rose the most in Q1-2022, where expenses jumped 6.9% quarterly. Edmonton and Toronto followed closely behind as costs accelerated 6.8% each between Q4-2021 and Q1-2022.

Statistics Canada stated that although the costs to construct a single-detached house in Toronto grew the most during Q1-2022, the expense to build townhouses climbed the most of all the buildings in scope for the survey in both Calgary and Edmonton.

Interestingly, higher residential construction costs in Calgary and Edmonton also coincides with the highest monthly increases for new housing prices in over 15 years for the cities. Home prices in Calgary recorded a recent high, surging 5.2% monthly in March, while new home prices in Edmonton reached a record in February as they rose 3.7% month-over-month.

Residential building costs grew the least in Moncton and ??St. John’s, where expenses jumped 2.1% and three per cent quarterly as price growth declined compared with the previous quarter.

Higher residential construction costs were mostly driven by rebounding softwood lumber prices, according to Statistics Canada’s research.

Growth of plumbing and electrical costs increase

Surveys conducted with construction contractors found that part of the growth behind higher building expenses is related to increasing labour costs. A higher number of job vacancies for the trades has contributed to higher wages in these occupations.

“In addition, amid rising fuel prices, contractors cited that a larger share of their expenses were now allocated to the transportation of their building materials,” the report stated.

Plumbing and electrical product prices also continued to rise in Q1-2022 as electrical safety and security systems reported historically strong quarterly price growth.

“These higher prices have had a particular impact on the construction costs of schools and factories,” noted the report.

Those contractors surveyed attributed higher plumbing prices to rising labour costs and the higher price of materials. For instance, the cost of plastic and rubber products hit record-high annual growth in February, up 19% in a year. Before September 2021, double-digit yearly growth for plastic and rubber products was last recorded in 1995, about 27 years ago.

In the same month, prices for electrical, electronic, audiovisual and telecommunication products also soared to a peak, rising 20.9% year-over-year.

Non-residential building costs report moderate price growth

Compared to residential costs, the expenses related to non-residential building construction climbed slightly less between Q4-2021 and Q1-2022, rising 2.6%. On a yearly basis, costs rose 12.8% year-over-year in the first quarter, up from the previous 11.4% high recorded during the last quarter.

Non-residential costs soared between 17.3% and 13.9% annually in Toronto, Ottawa and Edmonton, where construction cost increases were the largest. On a quarterly basis, non-residential building expenses grew the most in Toronto and Montréal, up between 3.6% and 3%.

“Higher construction costs in Toronto may have been influenced by demand conditions, with increased investment in warehouses and factories,” said the report. “Specifically, investment into warehouses in Toronto reached an all-time high in January, while investment into factories rebounded between November 2021 and February 2022 after declining over the previous year and a half.”

Higher Labour & Fuel Prices Drive Residential Construction Costs Up 5.6% in Q1-2022 by Michelle McNally | Livabl