BC building costs expected to stabilize

A strong provincial economy, thriving oil, gas and mining industries and continued population growth will lead to more stable construction costs in British Columbia, a cost-management consultant predicted Friday.

Vancouver-based consultant BTY Group predicts that after construction costs in B.C. rose by 10 per cent in 2007, this year's cost rise will be seven per cent, followed by six per cent in 2009, five per cent in 2010 and just three per cent in 2011.

However, it should be noted that these rises are compounded, and that both here and in other provinces price increases will remain well ahead of the national inflation rate.

The company also predicts that non-residential construction and housing starts will remain at high levels, and because of stabilizing construction costs, investment in public and private sectors of the construction industry will be strong.

By contrast, projections in other western provinces will remain high because of a high demand for construction. Alberta is predicted to see construction costs rise 18 per cent this year and 15 per cent in 2009, not recording a single-figure rise until 2011, at seven per cent. Saskatchewan's cost increase is predicted to hit 13 per cent this year and 10 per cent in 2009, before falling to eight per cent in 2010 and six per cent in 2011.

Ontario is on a similar curve with B.C., with its construction costs rising seven per cent this year, six per cent in 2009, and four per cent both in 2010 and 2011.

One reason for higher construction rates in the western provinces is population growth. Saskatchewan, which experienced population declines for decades, actually grew in 2007, and this is reflected in housing starts.

B.C. had a record year in 2007 for non-residential building construction, totalling $5.9 billion, up 13 per cent from 2006.

Philip Hochstein, president of the Independent Contractors and Businesses Association, said a stabilization of construction costs will be good for both builders and home-buyers.

"My members, the contractors, are in a better position to give estimates with a lot more certainty and with far fewer caveats than in the past," said Hochstein. "For a consumer, certainty is everything.

"If developers have to build in contingencies for unknown inflation, I think those contingencies will be smaller."

Neill McGowan, a managing partner with BTY Group, said it's difficult to say if stable construction prices will mean stable housing prices. Housing prices are affected by many things other than construction cost such as mortgage rates, population and housing demand, he said.

"Prices are a function of cost," said McGowan. "Developers have to make a profit to make a project a go. They're paying a lot of money to get projects built, and they keep pushing up their prices. Some of the developments now are selling in the $800 to $900 per square foot range."

Alberta's rates will be pushed upwards by the province's high number of oil patch projects and Calgary's office-building boom, said McGowan.

"We don't have any major office buildings going in at Vancouver," he said.

(prepared by Mark Andrews/Vancouver Sun)