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Feb 1, 2024

Q4 construction costs see slight increase

Residential building construction costs increased 0.9 percent in the fourth quarter, following a 1.2 percent increase in the previous quarter, says Statistics Canada. Non-residential building construction costs rose 0.7 percent in the fourth quarter, following a 1.3 percent increase in the previous quarter.

The deceleration observed in the fourth quarter continued the 2023 trend of abating price pressure in both residential and non-residential building construction costs. The fourth quarter marked the slowest quarterly growth since the second quarter of 2020 for residential building construction costs, and the slowest quarterly growth since the fourth quarter of 2020 for non-residential building construction costs.

2023 construction sector in review

Skilled labour shortages, rising material prices, and the effects of high interest rates were all noted as key drivers of 2023 building construction price increases, says Statistics Canada. As construction activity remained strong through 2023, persistent labour shortages across several industries increased competition for labour, driving wages, and, ultimately, construction prices higher.

With interest rates remaining elevated through the year, new housing starts slowed (-8.2 percent) in 2023, as did number of building permits and permit values for both new residential and non-residential construction.

With activity slowing, the construction industry job vacancy rate ended November 2023 at 4.5 percent, its lowest level since February 2021. Despite the steadily declining vacancy rate, persistent skilled labour shortages put upward pressure on wages in most industries through 2023. As these pressures continued to abate, residential and non-residential construction costs continued to decelerate through 2023 from the double-digit increases seen in 2022.

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