The urban fabric of Canadian cities is transforming at a brisk pace, but not without its hurdles. In recent years, an unprecedented surge in construction costs has become a formidable barrier, reinforcing trends that could reshape the metropolises of the Great White North for generations. Taking the pulse of cities like Toronto reveals a startling snapshot: construction costs leaping by more than 40% between 2020 and 2023.
Toronto earned the dubious distinction of witnessing the world’s second-highest increase in building expenditure, trailing only Prague. As per the global findings by Compare the Market, Toronto’s construction expenses soared by an eye-watering 40.5% by August 2023. This is a number that resonates with urgency, especially in a city continuously grappling with affordability and growth.
Singapore, another urban heavyweight, charted third place with a 32.8% uptick, a number not far behind yet starkly illustrative of a pervasive global pattern influenced by post-pandemic supply chain disruptions. But the complexity of Toronto’s situation is particularly underscored by exclusive bidding processes that restrict competition and high borrowing costs due to labor shortages. Meanwhile, Calgary, also feeling the pinch, registered a significant 28.5% increase, placing fifth in the same rankings.
Looking at the broader strokes of the Canadian real estate canvas, the situation is no less stark. By the summer of 2023, reports mentioned by RBC staff like Robert Hogue and Rachel Battaglia flagged a 51% rise in Canada’s Residential Construction Price Index since early 2020. Prices for staple construction materials like concrete and structural steel jumped, while lumber prices hit especially dizzying peaks in 2021 and 2022. Further compounding the costs are burgeoning municipal development fees, which for some housing types, surged by as much as 30% annually in 2022.
It’s clear the stakes are high. With Canada’s population burgeoning and municipal governments hiking fees at a breakneck pace, questions loom about the future of housing supply. Experts predict that to meet the sweeping supply targets, the nation must increase homebuilding — a move that, paradoxically, will further stoke demand for materials and possibly strain production capacities, especially for high-density developments that require vast amounts of cement.
As policymakers pivot towards initiatives like the express entry for skilled trades, aiming to alleviate labor shortages and stabilize hiring costs, the true impact of these measures remains to be seen. They arrive at a crossroads where supply meets demand and large-scale strategies intersect with grassroots realities.
In the Greater Toronto Area (GTA), for instance, provincial legislation is spurring a marked shift towards denser urban living, transforming neighborhoods around transit hubs. It’s but one reflection of the balance sought between growth and manageable development costs, echoing sentiments across Vancouver, Richmond Hill, Oshawa, and other bustling hubs.
For Toronto and its fellow Canadian cities, 2023 closed on notes of economic caution mingled with pragmatic optimism. With the largest fireworks display in Canada marking New Year’s Eve in the vibrant harborfront of Toronto, it was a symbol of determination against the backdrop of fiscal constraint. As industry insiders navigate through the complexities of urban development faced with soaring costs, the resolve to build smarter, more affordable, and sustainable living spaces remains a national imperative.
As 2024 dawns, stakeholders from Vancouver to Halifax are holding fast to the hope that affordability, supply, and costs will find their equilibrium — the keystones of Canada’s urban future.