According to Statistics Canada, prices for residential building construction increased 5.6 percent in the first quarter—the largest increase since the data series began in 2017. Non-residential building construction prices rose 1.5 percent, led mostly by higher construction costs for factories and warehouses.
Construction costs were up for every building type in the first quarter, ranging from a 1.2 percent increase for office buildings, to a 6.9 percent gain for townhouses, followed closely by single-detached houses (+6.8 percent).
Higher construction costs overall were mostly attributable to a shortage of construction materials, which led to higher month-over-month prices for softwood lumber (+11.9 percent) and veneer and plywood (+20.1 percent) in March. Softwood lumber (+118.9 percent) prices rose at their fastest year-over-year pace on record in March, partially because of low stocks following the temporary shutdown of sawmills during the first wave of the COVID-19 pandemic. The demand for materials continued to be high as building materials and supplies sold by wholesalers were up 19.1 percent year over year in February.
The surge in residential construction costs was also spurred by historically low interest rates and a desire for more living space during the pandemic. Investment in residential construction continued to rise, mostly driven by the growth of single-family home construction. Residential construction investments have been reaching consecutive record levels since September 2020 and stood at a new high of $12.3 billion in February.
Non-residential building construction costs rose at the fastest pace for factories (+2.1 percent) and warehouses (+1.8 percent) in the first quarter. Warehouse space is at a premium in the wake of retail e-commerce sales increasing 92.0 percent year over year in February, following a 116.8 percent surge in January.
Non-residential building costs were up in every city covered by the survey, with prices rising at the fastest pace in Ottawa (+2.4 percent) and Montréal (+2.0 percent), mostly because of warehouses and factories.
Residential building (+11.7 percent) construction costs rose at a record year-over-year pace in the first quarter, mostly because of limited supply and increased demand for building materials.
Construction costs for a single-detached house accelerated from a 4.4 percent year-over-year increase in the third quarter of 2020 to a 14.6 percent rise in the first quarter of 2021.
Non-residential building construction costs rose 2.1 percent year over year, led by Ottawa (+4.9 percent) and Montréal (+4.4 percent), mostly because of factories.