News Details

Reconstruction Costs in Canada Remain Stable, but Lumber Prices on the Rise Again

04 March 2022

Opta’s Q1 analysis reveals a stable 5.6% increase YOY from January 2021 to January 2022, with higher expenses being most prevalent in Quebec, followed by the Northwest Territories. This continues the trend mentioned in our previous analysis showing higher price increases in eastern provinces in the second half of 2021. Lumber prices are 30% higher YOY.

The BC Flooding in November 2021 triggered projected increases in future pricing and immediate supply delays. We expect average lumber prices to increase by 35% over current levels but will stay below the May 2021 peak. Once supply issues and delivery bottlenecks are resolved, and mills resume full production, we expect a reduction in prices by Q1 or Q2. Nevertheless, unless Omicron quickly peaks and dissipates in early 2022, material supplies are likely to be affected.

Global supply chain issues have led to some material scarcity across the country, concentrated, most noticeably in the east/Maritimes and the Territories. Wages are generally not increasing across all trades with the exception of roofing/siding and HVAC. The growing scarcity of skilled trades workers is leading to increased labour shortages. Worse still, infections and subsequent time off amongst employees have exacerbated the general labour shortage, leading to the most pervasive project delays in the industry.

Component costs have risen with an overall increase of 5% YOY from January 2021 to January 2022. However, the change compared to September 2021 shows a drop in cost for every component (Basement, Kitchen, Bathroom, Roofing, and Aluminum Siding). Broadly, these changes can be attributed to the following three reasons: supply chain issues in more remote locations, reduced roofing costs in Q4 (post-storm season demand), and lower-than-expected kitchen costs.

The total value of building permits in Canada increased 6.8% to $11.2 billion month over month in November 2021. Construction intentions for the residential sector have risen by 12.0%, reaching the highest level since the record set in March 2021. Despite notable growth in commercial and industrial components, the non-residential sector declined by 3.4% overall in November. Opta’s loss control experts continue to see a spike in home renovations during the property inspection process.

A lot has changed. How does this this impact your portfolio? Click here to read the full Q1 Reconstruction Cost Report

The effects of the pandemic and inflation have undoubtedly created new risk and opportunities on both sides. Get insights on which properties have undergone renovations, have new permits issued, need ITV adjustments, or have new exposures like flood, perils, or wildfire.