Photo: Bjørn Bulthuis/Flickr
Rising project costs are the main hurdle for developers active in Canada’s most expensive housing markets, a new report suggests.
“Strong demand in all sectors has pushed construction volumes to record levels and contributed to rapid cost escalations in Vancouver and Toronto, including a tight pool for skilled construction labour,” reads real estate consultancy the Altus Group’s 2018 Real Estate Development Trends Report.
Housing Market News Alerts
Sign up now for news alerts on the Vancouver housing market
It’s not only an issue in Canada. Altus Group notes developers in the UK, US, Australia, Japan, and many European countries face similar headwinds, although a variety of factors are creating labour shortages from market to market.
In Japan, for example, the looming 2020 Tokyo Olympic Games has contractors tied up working on related large-scale projects. Meantime, Europe is seeing fewer young people taking on construction work as the workforce ages.
In strong-demand markets, where construction activity is reaching record levels, developers compete for a limited pool of available talent, from tradespeople to specialist consultants, as well as construction equipment.
In Canada’s priciest cities, labour shortages aren’t the lone issue driving up the costs of undertaking condo and rental projects.
“On the residential side, these pressures, combined with long approval processes and construction capacity challenges, have resulted in condominium project delays and cancellations,” the report, which includes a survey of 417 international developers, property owners, and investors, continues.
Between 2013 and 2017 in the Greater Toronto Area, 35 condo projects were cancelled out of the 532 that had launched sales over that period, according to Altus data Livabl requested late last year. That works out to a cancellation rate of just 7 per cent for Canada’s most active market for development.
However, 38 per cent of respondents with projects in the Canadian market viewed the development approval process as having a negative impact locally, the highest share of any region Altus Group surveyed.