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Have you been to IKEA lately? Everything is out of stock. And, while that may be annoying when you can’t buy some OSYNLIG candles with the scent of pine, it’s indicative of a much more significant challenge we all face together (boards, property management, and trades).
Here are the trends we are seeing in construction and maintenance that make it more important to plan appropriately to react to delays and cost overruns.
1. Inflation Is On The Rise
Inflation continues to impact reserve fund plans and capital projects. Surging prices have impacted every sector, with construction suppliers being no exception. The retail price of goods is going up 30 to 40, 50 percent on certain things, from tools to consumables, you name it. Boards are encouraged to work with their property managers and be proactive in the planning of these projects. Magnum York’s averaged consumer price index (CPI) is recommended to use when budgeting things like year-over-year costs and forecasted reserve fund capital expenses: https://introducing.magnumyork.com/CPI
The high demand for products has not slowed down due to the uncertainty and unpredictability of the market.
2. Increase In New Construction
There has been a 16.4% increase in new construction in Alberta, starting in 2022. This resulted in more demand for labour and resources. From January to the end of March, the City of Calgary received an increase of 17.2% in residential building permits compared to the same time period last year.
Homes under construction across Alberta are trending above previous years. There are many factors at play but the key takeaway is Alberta is building more than they have in the past.Mortgage Sandbox
3. Labour Shortages
The impact of the pandemic is seeing challenges in the labour market, as Alberta’s unemployment rate reached 6.5% in March.
“Employment in some sectors continues to lag, while other sectors face pronounced skill shortages,” the 2022-25 Fiscal Plan states, citing a survey by the Alberta Chambers of Commerce that reported nearly half of respondents were dealing with staff shortages, and an RBC study that predicts demand for workers is going to climb as the province continues to recover from the pandemic.
4. Timber Prices Continue To Be A Challenge
Timber prices continue to rise due to an increase in demand. The initial COVID-19 lockdowns forced many lumber mills to scale back production. Still, with homeowners having nowhere to go and plenty of time, this saw an increase in renovations and a demand for materials, sending prices to a record high. Sawmills then ramped up production to meet the demands, which helped ease the price, that is until the house markets took off, surging the prices once more.
Construction material price increases have added almost $80,000 on average, nationally, to the price of a 2,475 sq ft home since the start of the pandemic, and half of that increase is in lumber costs alone.Canadian Home Builders’ Assocation
5. Supply Chain Issues Flare Up
The global supply chain crisis, stemming from the COVID-19 pandemic is delaying more than just those IKEA shelves. We’re seeing delays in renovation projects as the supply chain issues have severely disrupted the flow of goods needed to finish the work. All of this is happening when Calgary suppliers are the busiest they’ve been in years.
Supply chain issues continue to cause delayed construction completion, with an average delay across the country of 10 weeks. Topping the long list of serious shortages are appliances, followed by garage doors, and bathtubs, showers and sinks, to name a few.Canadian Home Builders’ Assocation
6. Insurance Sees Higher Premiums
The world of insurance is changing drastically, with premiums soaring and stricter requirements for replacing materials and project management. Not only is the Alberta weather (hail, floods, fire) a factor in the rise of insurance premiums, but so is the rise in the cost of replacement goods. Especially wood-framed apartment-style structures, as the cost of timber continues to increase.
7. Rising Fuel Costs
If you’re one of the millions of Canadians who drive, you may have noticed that gasoline is more expensive now, than ever. This impacts the world of trades, as contractors have cited that a larger share of their expenses is now allocated to the transportation of their building materials.
All of these factors contribute to the challenge of having the summer projects go ahead without a hitch. On top of these issues, property managers are struggling with the quoting process for projects. Trades are finding it difficult to provide accurate quotes as the delivery and cost of materials are uncertain.
- New Bill 37 Effective August 29, 2022: Promptly Pay Contractors or They Could Lien Your Property.
- What Consumer Price Index (CPI) Increases Mean For Alberta Properties and Communities
- Financial Post: ‘Extreme’ supply chain snafus hit lumber industry, forcing output curbs as prices hover near record
- Alberta’s 2022-25 Fiscal Plan
- Is there a skills gap in Alberta’s labour market? Two economists weigh in
- Canadian Home Builders’ Association
- Webinar Recap: 2021 State Of The Condo Insurance Industry In Alberta
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