Demand for housing, lumber shortage drive up cost of residential construction. Home prices next?

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      The cost of constructing a home in Canada has become more expensive.

      It’s basically the law of supply and demand at work.

      A new report notes that high demand for housing and shortage in lumber supply for construction have driven up the cost of building a home.

      Statistics Canada reported that residential building construction costs in the fourth quarter of 2020 rose 6.6 percent compared to the same period in 2019.

      The increase is four times the pace of non-residential construction, which registerd a 1.5 percent year-over-year rise in the fourth quarter.

      According to Statistics Canada, the increase in the cost of building homes across the country was “mainly because of the high demand for housing and a shortage of lumber across the country”.

      The 6.6 percent increase measured the change in 11 major metropolitan areas.

      For the Vancouver metropolitan region, the 2020 fourth quarter year-over-year increase was 3.7 percent.

      “Lumber prices are predicted to continue rising for most of 2021, which will increase the construction costs of new homes,” Statistics Canada reported Thursday (February 4).

      And this will likely push up the price of new homes.

      “Homebuilders could struggle to take advantage of the demand for new housing as they scramble to obtain the lumber they need amid tight supplies,” Statistics Canada reported.

      Also, the demand for residential construction in the U.S. and Canada remained high in the last quarter of 2020.

      According to Statistics Canada, the total value of building permits in the two countries increased 9.5 perent in the fourth quarter last year.