Building construction price indexes, third quarter 2021
Residential building construction price growth slowed in the third quarter, amounting to 3.7% following a 7.6% increase in the second quarter. Similarly, non-residential building construction price growth slowed to 2.8% after reaching 3.9% last quarter, the highest level in 13 years.
Increases in the costs of building construction slowed down in the third quarter, following a second quarter peak
The impacts of the drop in price of lumber from the second quarter reference period (May 15, 2021), when the price was at its recent peak, did not translate to comparable price decreases in the Building Construction Price Index (BCPI) in the third quarter. The decline in the sales of lumber in the manufacturing, wholesale trade and retail trade sectors, as well as the decreasing value of building permits for residential building construction provided signals that the demand-induced price increase for lumber eased in the third quarter.
Wood, plastics and composites continued to be the largest contributor to the price change for residential building construction in the 11-city composite. Increases in the price of plastic resin as measured by the Industrial Product Price Index, attributed to manufacturing capacity disruptions from severe weather events earlier in 2021, also contributed to the increase of residential building construction costs. Plastic resin is used in various building construction materials, from electrical wire to engineered wood and PVC piping products. Non-structural wood products, such as windows and doors, were also cited by contractors as rising in price, despite the overall decrease in lumber cost.
The next largest contribution to the change in residential building construction prices was the increased cost of concrete and its associated components, including reinforcing steel. The rise in the price of concrete contributed the most to higher costs of building high-rise apartments, as concrete is one of the primary building materials in high-rise residential construction. Contractors cited increasing fuel and steel reinforcement prices, as well as truck driver shortages, as reasons for higher prices of concrete products.
Similar to the previous quarter, concrete, followed by metal fabrication products, contributed the most to the change in the cost of construction of non-residential buildings in the 11-city composite. Contractors cited that for both types of products, recent increases in raw steel prices are attributable to supply constraints that include longer delivery times and shorter price guarantees. Increases in labour costs, attributed to the skilled trade shortages across the sector, were also noted by contractors. Demand-induced price pressures have also contributed to the continued strength in the price growth of concrete and metal fabrication products within the non-residential sector.
Single-detached houses and townhomes drive city-level price growth in residential sector
Calgary (+5.4%), Edmonton (+4.9%) and Toronto (+4.5%) had the largest quarterly growth in residential building construction costs, all three mostly driven by single-detached houses and townhomes. In Calgary, contractors reported that the cost and availability of materials, the labour rate increases and the skilled labour shortage had an impact on the construction market.
Increases in the non-residential building sector were led by higher construction costs in Toronto (+4.2%) Ottawa (+4.1%) and Moncton (+3.3%).
Year-over-year city-level construction costs surpass previous highs
Building construction costs for residential construction increased by 20.3% year over year in the third quarter for the 11-city composite, the highest year-over-year increase recorded since 2018. The cities with the largest year-over-year change this quarter were Calgary (+34.4%), Ottawa (+28.8%) and Edmonton (+24.7%).
Non-residential construction building costs rose 8.3% year over year, which was the largest gain since the third quarter of 2008. The cities with the largest year-over-year change this quarter were Ottawa (+13.6%), Toronto (+11.6%) and Montréal (+9.7%).
Note to readers
The building construction price indexes are quarterly series that measure the change over time in the prices that contractors charge to construct a range of commercial, institutional, industrial and residential buildings in 11 census metropolitan areas: St. John's, Halifax, Moncton, Montréal, Ottawa–Gatineau (Ontario part), Toronto, Winnipeg, Saskatoon, Calgary, Edmonton and Vancouver.
These buildings include six non-residential structures: an office building, a warehouse, a shopping centre, a factory, a school, and a bus depot with maintenance and repair facilities. In addition, indexes are produced for five residential structures: a bungalow, a two-storey house, a townhouse, a high-rise apartment building (five storeys or more) and a low-rise apartment building (fewer than five storeys).
The contractor's price reflects the value of all materials, labour, equipment, overhead and profit to construct a new building. It excludes value-added taxes and any costs for land, land assembly, building design, land development and real estate fees.
With each release, data for the previous quarter may have been revised. The index is not seasonally adjusted.
Statistics Canada launched the Producer Price Indexes Portal as part of a suite of portals for prices and price indexes. This web page provides Canadians with a single point of access to a wide variety of statistics and measures related to producer prices.
The video "Producer price indexes" is available on the Statistics Canada Training Institute web page. It provides an introduction to Statistics Canada's producer price indexes—what they are, how they are made and what they are used for.
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