Builders optimistic about new home growth despite supply chain

Demand increases for new single and multi-family homes in Calgary

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Homebuilders in Canada, including those in Calgary, are quite optimistic, but a little less compared to the start of the year.

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Much of the history of the data from the latest findings of the Housing Market Index from the Canadian Home Builders’ Association.

The organization representing home builders and developers released its findings for the third quarter – July through September – noting that sentiment for builders of single-family and multi-family homes was around 78 out of 100, down 7% from report in the second quarter.

“We’re coming off a record high in housing demand and, in turn, builders’ confidence was reflected at the start of the year,” said Kevin Lee, CEO of the CHBA.

“Now we’re coming back to what’s still a pretty strong market, but it’s down from those record highs. “

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The survey, based on feedback from over 300 builders / developers on current and future conditions and buyer demand, is considered a leading indicator of the health of the Canadian new home market.

Lee notes that no regional market figures exist from the index, but Alberta – including Calgary – has seen continued strong demand for new homes, especially detached single-family units.

Demand is also increasing in Calgary’s new multi-family, a recent report from Zonda Urban also revealed recently.

The main driver of the new multi-family market, however, has been townhouses – often a proxy for single-family detached homes for more budget-conscious buyers.

These buyers have generally been looking for a few years “for their best option for more space, and these were townhouses often located in outlying areas,” says Jackson Cornelius, market manager and advisor for Zonda Urban in Calgary.

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“But it was accelerated by COVID and working from home. “

The pandemic has also posed challenges for the new housing market, especially with regard to supply. The rapid increase in lumber costs has been the most notable of these supply challenges – but not the only one, Lee says.

“We saw in the third quarter that even though lumber prices had started to drop, they were still adding on average about $ 34,000 nationwide to the price of a home.”

Yet the prices of most inputs were also rising due to high demand and disrupted supply chains, he adds.

“Aside from lumber, rising material costs add about $ 23,000 to the average price of a 2,400 square foot home. “

In total, the average cost of building a new home has increased by approximately $ 57,000 due to rising input costs.

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Lee adds that Alberta saw inputs slightly higher than the national average, adding $ 59,000 to the price of a home. Yet that larger increase is generally offset by lower land costs in the province than in British Columbia and Ontario, he says. In addition, skilled labor – in short supply before the pandemic – accounts for 19% of the cost of a home nationwide, while it accounts for just 14% of new construction in Alberta.

While supply chain problems are expected to be short-lived, the labor shortage will likely take longer to resolve.

“About 20 percent of our workforce is expected to retire over the next decade, and it’s already started,” Lee said, noting that residential construction is not the only industry facing this challenge. . “Frankly, there are simply not enough workers for everyone in the Canadian economy.

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