Trend 2. Increasing Construction Costs = Pricier Condos
As the average Toronto pre-construction condo grows to $1,000 per square foot, we find it important for our buyers and potential buyers to understand some of the reasons why.
Gone are the days when developers had their choice at a multitude of above ground parking lots to convert into condominiums. Today, the number of developers competing against one another for land has increased while the number of lots available to develop each year has dropped immensely. They’re buying land for much more than they ever have; with proposals of turning the space into a community that is triple the density of what once was.
Successful companies are able to stay at the top of the industry because they are still able to deliver an in-demand product to the masses at a price they are willing to pay. Nevertheless, the cost to purchase a condo is becoming pricier and the reason for increased condo prices is mostly due to rising construction costs.
One of the best publicly available resources that you will find for construction costs is from the Altus Group’s annual Construction Cost Guide. It’s chosen as a trusted budgeting tool by developers, lenders, contractors, consultants and various industry professionals. Within their report, such figures as sales of new construction, office leasing and construction costs per buildable square foot for land.
With a guide like this in hand, developers must estimate costs like labour and materials and commit to delivering the product at that price. Within the 3 to 5 years that it generally takes to complete a condo, the cost of any given element of construction can increase for various reason like a shortage of materials, workers and bad weather. Hard and soft development costs are estimated, subjective and can change at any given moment.
A prime example of an unexpected change is found when we take a look at the steel and aluminium tariffs with the US, which has contributed to the continued upward pressure on prices. According to some reports, these new tariffs have increased the cost of materials like steel rebar, a key component in concrete construction. Since August 2018 steel rebar has increased 58 per cent compared to the previous year. This has resulted in instances where end-selling prices for studio and one-bedroom units in downtown projects are upwards of $500,000.
Not to mention, Development Charges and Levies have gone up by 33%, but you can get all the fine details on this from the City of Toronto.
Land acquisition costs paired with construction costs in this political climate has heavily contributed to the new norm of $1000 psf we see today. Getting into a pre-construction launch during the platinum access phase means you can save thousands of dollars and you are privy to some of the best pre-construction condo deals available. This is also where you score first dibs on the best floor plans too.