Monday, October 13, 2014

I want to build a new house but the prices seem to be really high right now, I was thinking about waiting a year and seeing if the prices come down, would you recommend this?


I want to build a new house but the prices seem to be really high right now, I was thinking about waiting a year and seeing if the prices come down, would you recommend this?


The cost of construction is always rising, so if you think that you can wait and the price of your new home or renovation will go down your going to be disappointed.
Routinely when planning and designing custom homes it takes 8 months to 2 years from the time that we start designing, adjusting and then pricing the home out to the point where those services that were priced start to be billed to the homeowner.

A lot of times once the company that priced the job finally gets approval to go ahead with the job they have to go to the general contractor and ask for a change order because of price increases to either the material being used or their labour rates have gone up in that time period.

In most cases waiting to do any kind of construction does not result in a reduction in costs, in fact in most places (because of inflation alone) the cost of construction rises 2 to 3 percent annual per year.

Then you need to add in that the price of raw materials has a tendency to go up year over year almost regardless of what the economy is doing, this is because the demand for raw materials like wood and concrete is always strong somewhere in the world and the supply of it is always limited. This limited supply is only getting worse as big companies are working more on a supply and demand business with less stocking of product then they ever did before to help reduce overall costs.

To give you a scenario, where we build homes in Ontario the cost of construction has risen more than 10 percent in the last 2 years alone. There have been several factors to this increase and most of them are completely out of the contractor’s control. Here is a brief list of the cost increases that contractors have been saddled with in the last 2 years in the province of Ontario;

8% rise in the cost of WSIB which is the workers compensation insurance board. These costs have to be paid if you have employees; this is a dramatic cost increase.

The minimum wage has risen 15% in the past 2 years. I don’t employ anybody making minimum wage but when the bottom wage goes up there is a raise of wages that has to go through the whole company so the employee’s have a fair wage. This does affect the costs of a lot of my suppliers and sub contractors as they will employ some people at the minimum wage boundary.

Anything made with oil has gone up in the past couple of years as the cost of oil has risen. A lot of the things that are used to build a home are made from oil or delivered with vehicles that consume oil and gas.

The rules and regulations of safety in the province of Ontario have gone through a dramatic overhaul. With new rules and regulations businesses have had to rewrite health and safety manuals and retrain their employee’s. This all costs money and this drives the overhead of the company up. As the overhead goes up the contractor must charge accordingly to cover their overheads.

The building code in the province of Ontario went through an overhaul, the insulation value in all residential new homes, the windows and the heating system have all had to become better. This means that the actual cost of the building has gone up even at the basic level.

The building permits and the development fees associated with construction have risen dramatically over the past two years. Municipalities are strapped for cash so they are trying to make it up by charging more to people who want to build homes. Some of these increases are as much as 25% depending on how long it had been between increases.

Waiting to do anything in construction never seems to reduce the cost; it is the nature of the business. Since construction is an ever evolving industry of making better and better houses the costs will always be going up. If I were you I would take your time to plan and design what you want and then build your home when you are ready not when you think it will be cheaper.

Rob Abbott
Village Builders Inc.

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