housing
CONSTRUCTING A NEW COST NARRATIVE As we discussed in earlier sections of this report, our world has become more expensive over the past year, from home purchase prices, to gasoline, to health care. Conspicuously missing from this list is, of course, lumber, the price of which has been on a real roller- coaster ride, recently having peaked at four times its pre-pandemic value but now having given up virtually all of those gains. When the cost of lumber was ascending to new heights, the term “rising construction costs” was commonly used in place of “rising lumber costs”. For many, the distinction seemed
pedantic, but of course not all building types use wood products as intensively as others. This explains why in comparison to the 11.4% year-over-year increases that were realized in Canada’s construction cost index for detached homes in Q2 2021 the cost of high-rise buildings only rose by 3.9%, while industrial saw a 5.3% increase. These are important distinctions to make, for they fundamentally challenge the rising construction cost narrative that has pervaded many conversations of the past year.
THE MYTH OF EXPLODING CONSTRUCTION COSTS
20%
11.4%
10%
3.9% 5.3%
0%
-10%
-20%
THE GREAT RECESSION
-30%
HIGH RISE
INDUSTRIAL
DETACHED
SOURCE: STATISTICS CANADA, BUILDING CONSTRUCTION PRICE INDEX DATA: YEAR-OVER-YEAR CHANGE IN CONSTRUCTION COST INDEX BY BUILDING TYPE, CANADA
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