How Much Does It Cost to Build A House in 2021?

 

Building a new home is a large undertaking, but if done right, the results are well worth the effort.  Whether you choose a production design or decide on a custom-build, you’ll be the proud owner of fresh, new home that hasn’t been lived in before.  It’s not that buying an older home is bad, not at all, but in terms of having a home fit your lifestyle like a glove, it’s hard to beat building new.

If given the choice, 9 out of 10 homeowners would choose to build a new home to their liking, but many opt not to because of the added costs.  There are many extra financial factors involved (often time-consuming ones as well) that can prohibit a new construction.  Land will need to be purchased, house designs drawn-up, permits acquired and a construction loan may need to be secured.  The added costs don’t mean that you shouldn’t do it, but you need to be aware the end price will be higher.

How much is it to build a house? Is it cheaper to build your own house?  These questions aren’t easy to answer but we’ll do our best to help – keep reading.

 

How much does it cost to build a house in Ontario?

 

Construction costs can vary depending on the location of your property because material and labour expenses may be cheaper or more expensive in certain parts of the country.  One of the largest factors that will affect the total cost to build a house are land prices,  which can vary widely based on location.  Below you’ll find a chart containing rough estimates of the construction cost per square foot for homes in some major Canadian cities.

Note – A pre-designed home will be cheaper to build than a custom-built home and adding luxury design elements can raise the cost significantly.

Average cost of building a home in Canada (all prices are per square foot)

Source: Altus Group 2020 Canadian Cost Guide

Home building costs have significantly increased in 2020/2021 due to material shortages and labour disruptions caused by the COVID-19 pandemic. Cost increases of 50% are not unheard of and houses have become much more expensive to build.  You can use the above table to calculate roughly how much your home will cost to build based on it’s square footage.

A closer look at what it costs to build a house in Ontario

 

Ontario has the largest population of all the Canadian provinces showing a growth rate of 9.56% from 2016-2020.  The province also has the fastest growing housing market and the average cost to build a home fluctuates a lot.  The average per square foot cost of a detached home in the Greater Toronto Area (GTA) ranges from $115 up to $900 depending on location.  As with most major cities in Canada, rural locations will be cheaper to build in than the suburbs.

 

Why does the cost differ so much between areas?

 

The largest contributor to the variation in new-home costs across the country is land prices.  Due to variations in population size and demand for houses, it makes sense that a property in Toronto would cost more than a comparable lot in rural Alberta.  Urban areas will cost more per square foot than rural areas, sometimes by a large margin.

 

Cost of land in Canada

 

 

When building a new home, it’s usually cheapest to find land that is currently unoccupied with no existing house or structure built on it.  That’s because buying a property with a house already on it means you’ll be paying for the structure as well as the land, even if you plan to demolish it completely.  To save costs, work with your real estate agent and locate a piece of land to purchase or search for listings of vacant land online.

As with most real estate prices, urban zones are much more expensive that rural properties.  Land in the GTA varies from $50 to $200 per square foot, whereas in Calgary and Edmonton, per square foot prices are less than $50.  However, even in rural areas, prices vary a lot based on property location.  For example, a farm just north of Dundas in Oakville may be valued at $1M per acre, whereas further north the cost could drop significantly.

Keep in mind that buying property in a rural area means the land itself will be cheaper but associated costs such as utilities, travel and living expenses might be higher.  According to Statistics Canada, the Canadian per acre average was $3,245 in 2019, while in Ontario it was $11,446 per acre. Similarly, Ontario farmland near the urban area of the GTA prices out at $17,834 per acre, while in Northern Ontario prices drop to just $3,621/acre.  Those are big price differences based solely on location of the land, so it’s well worth your time to thoroughly consider your options.

Average cost of farmland in Canada (per acre) – Statistics Canada

 

What factors affect the cost of building a new house?

 

 

Property value and location aren’t the only things that affect the price of building a house.  The actual cost of construction is a huge factor with lots of aspects for you to consider.  Material costs, building permits and labour costs are a few that can cause the cost of your new home to fluctuate.

The list of factors affecting building cost is rather large and some noteworthy examples includes:

Property location:  As already mentioned, the location of your land will cause the biggest difference in price.  Choosing to live in a major city, the suburbs or a rural area will drastically change the price you can expect to pay for property.

Land:  Building costs will also vary depending on the “lay of the land”.  Is your property sloping or flat, are there trees or large boulders that need clearing prior to building?  These are considerations that can affect the overall cost of building a home.

Design plans:  Are you choosing a production home or creating from your own custom blueprint?  The latter option will require a professional architect or designer to draw up the plans and their expertise costs money.

Permits, fees, inspection costs:  Government regulations on the construction industry can add extra costs to your new build in a hurry.  Aside from building permits, there are several aspects that need to be considered to keep your home up to code.

Restrictive covenants: Some properties (usually due to homeowner associations or protected areas) may require specific guidelines be adhered to.  This could mean adhering to requirements like shoreline building restrictions or using specific building materials.  Costs vary depending on what is required on your property.

Size and design of your home:  The bigger your build, the more materials you’ll need and the longer it will take to construct.  It’s pretty simple – the more square footage, the higher your overall cost.  Another thing to consider is that adding levels (floors) to your design will incur additional costs through the necessity of items such as stairs, load bearing structures, extra flooring and building scaffolding.

Your choice of building materials:  There is a big price difference between vinyl siding versus stone or brick veneer for the outside of your home,   and choosing vinyl flooring over wood or marble tiles will be much cheaper  The list of comparisons is almost endless, so suffice it to say that your choice of building materials plays a large role in the cost of building a home.

Your choice of builder:  To get your home built, you’ll need to hire a contractor to manage the project and various tradespersons to install the plumbing, electrical, roof etc.  Each professional you hire adds more variation into the cost to build your new home.

Finishing:  This is perhaps the area with the most choice in your entire home build.  Things like the type of doors, windows, lighting, fixtures, appliances among others will have a huge effect on the end-price of your home.

Custom additions to your home:  Similarly to how your choice of building materials has a big effect on cost, additions like a deck, balcony or pool will do the same.  Other considerations are things like driveways, garages, tool sheds, landscaping etc.

Existing structures:  If there is an existing home on the purchased property which is not incorporated into the new design then it will need to be torn down and removed.  This adds another substantial cost to the process that will likely be incurred before construction of your new home even begins.  To help keep costs down, it’s often a good idea to consider choosing a design that utilizes aspects of the existing structure so you don’t have to tear everything down and start from scratch.

 

Production houses vs custom built houses

 

 

A production home, also often referred to as a tract home or pre-designed home is one where the entire construction process has been systemized by a large volume builder.  This type of listing usually combines the land and home as a package, and builders will offer a variety of predesigned building plan choices, some of which may have room for customizations.

The main attraction of a production home is the lower cost, as all the pieces that go together to make the home have been prefabricated in large volumes allowing you to save on both material and the labour costs.  Everything is ready to buy as a package, so the process is also much easier.  You’ll often see these styles of homes in newly built communities where one builder has constructed all the homes in the area.

Custom homes are usually built on land that you own or acquire, and a building plan is freshly created to your exact specifications.  You can choose to work with a separate architect and contractor or hire a design-build company to manage the entire process.  You’ll be more involved during the building process and you can decide exactly what you want your home to be.

Custom homes are usually higher-end and are generally more expensive because most aspects must be fabricated or constructed to your building plan specifications.  There are also added fees for design and managing the build, but that being said, most custom home builders are able to work within a variety of budget levels to deliver a great finished product.

 

How big is the average home in Canada?

 

 

To calculate roughly how much your home will cost, you can use the average per square foot price multiplied by the size of home you want to build.  In 2016, the average single-family home in Ontario had a size of 2,380 square feet, while in Nova Scotia the average was 1,530 square feet and British Columbia averaged in at 1,430 square feet.

Going by the average square foot home size for Ontario, a pre-designed home in Toronto would cost in the range of $273,700 to $511,700.  Comparatively, a custom-built Toronto home of the same size would price out at between $952,000 and $2,142,000.

 

Rough guide to construction costs

 

After you’ve sorted out the purchase of the land where you’ll be building your new home, you’ll need to plan for the construction costs.  We’ve consulted with our team of contractors and put together a list of the average prices you can expect to for the most common elements of a home construction.

 

Cost of building plans

 

 

There are generally a few options available for you to get building plans for your home.  The first is to purchase a stock or pre-designed building plan which typically costs between $700 and $1,500.  Another option is to hire a drafter for $1,000 to $3,500 to draw up a home blueprint.  To have a home design drawn up by an architect often costs between 6% and 12% of the home’s value but will provide a blueprint for your fully customized dream home.  Most architects will also charge from $1,000 to $3,500 to review an existing home blueprint.

 

Cost of building permits

 

The cost building permits varies across the country.  In Toronto, a building permit will cost you $198.59 and an hourly rate of $85.79 for inspections and examinations.  In Vancouver it’s a bit more complicated as a permit will cost $168 for the estimated first $5,000 of construction work, then $10.70 for each additional $1,000 over $5,000 under $50,000, and $5.40 for every $1,000 that’s over $50,000.  In Winnipeg, a building permit costs $219 plus $0.41 per square foot.  Halifax charges a per square foot rate of $0.30, with a minimum permit cost of $25 plus $0.10 per square foot of a basement or garage.

Building permit costs in major Canadian cities

It’s important to understand that building permit costs will vary depending on the scope of construction and will typically require a survey to be submitted along with engineer stamped drawings and architectural plans.  There are often additional permits required for HVAC, electrical, plumbing etc. and each may require submission of separate drawings from a qualified expert.  There is also a significant upfront cost for connecting city sewer and electrical systems to vacant land that is not already connected to the city infrastructure.

Tips to reducing the cost of building a house in Canada

 

 

When you undertake building a new house, you control most of the costs and you determine the budget.  There’s a lot of expenses involved so saving money where you can is always important.

Choose from existing home designs

There are a vast amount of pre-designed home blueprints available from home builders that cost much less than hiring an architect to create a custom drawing from scratch.  Chances are you’ll be able to find something that matches your needs and wants.

Take bids

Once you know the scope of your project, consider getting in touch with several contractors and asking them to bid on your build.  You’ll likely get a range of prices so remember, the cheapest is not necessarily the best.  The last thing you want is a contractor who cuts corners on quality or is unable to stick to a completion schedule.  Conduct your own research about each contractor on your list by looking for reviews, ratings, word of mouth referrals and examples of their previous projects.  Treat pricing as just one in the longer list of factors involved in your choice of contractor.

Size doesn’t always matter

Sometimes to stay within your budget, a smaller home might fit the bill.  While there is something to be said for potential material discounts the more you buy (for a bigger home), the general rule of thumb is a smaller home will cost less to build.  Choosing an open design layout will also help keep costs down because you won’t need to spend on extra walls, electrical, plumbing, doors, windows and other features.

Choose your aesthetics wisely

The home style you select will influence the cost in a big way.  A rustic or industrial styled home can be much cheaper to build than something featuring marble floors and chandeliers.

Take your lifestyle into account

You might have an image of your dream home in mind but make sure it’s also realistic and fits in with your lifestyle.  Do you entertain? Work from home? Are kids living with you? Do you love to cook? Do you need a home gym? What about storage space?  These are all valuable questions that can really help determine where you need to invest more money and where you can save a few bucks.

Use reclaimed and recycled materials

Not only are reclaimed or recycled items often cheaper, they’re also eco-friendly and can add character to your home.  Check salvage yards or charitable organizations for everything from doors and windows to kitchen cabinets and vanities for your bathroom.

Get quotes whenever it makes sense

Many areas of your new home build are places where you’ll be hiring a professional.  Examples of this are your HVAC system, water heater, and plumbing or electrical systems.  Shopping around can get you a better deal and will help you find the perfect professional for your project.

Do-it-yourself if you can

Nothing saves money like not having to pay a professional to complete a task.  If you’re handy, you can consider lending a hand and saving a few bucks.  A task like painting is time consuming and is usually manageable without being an expert.

Spend on items that will save money down the road

Don’t skimp on important aspects of your build, like proper insulation, weather proof windows, doors and roofing.  What you save now by going cheap, you’ll pay out year after year in wasted energy costs.

 

Renovating instead of building?

 

 

Building a new home can often be a very involved, expensive, and time-consuming project.  Some homebuyers might not be ready for that, in which case it would be a better option to renovate an existing home than building a new one. This could mean renovating a current home or a home that has been recently acquired.

Renovating is often much less expensive and can be broken down into smaller projects so the expense is spread out over time.  Some features of the existing home can often be left or used as part of the new renovation to help keep costs down.  Renovations are usually also completed faster so you can start enjoying the new space sooner.

Deciding whether to build a custom home from the ground up or upgrade an existing home through renovating, means considering what it is you want to achieve, how much you can afford to spend and what type of timeframe you’re comfortable with.   Both options can give deliver your dream home but in very different ways.

 

The effect of COVID-19 on the cost of building a home

 

 

As if building a new home (or renovating an older one) wasn’t challenging and expensive enough, COVID-19 has made everything even more difficult.  While demand for single family homes has increased dramatically, home builder’s ability to provide new homes has been hampered significantly.

Supply chains for materials have been interrupted, causing shortages all over the place, which have caused prices to skyrocket and build times to increase.  Tradespeople are also unable to work shoulder to shoulder adding to the growing concern of meeting demand.

Essential building items like doors, windows and most importantly lumber have become scarce and very expensive.  Many lumber products have seen their prices double as production remains limited due to COVID-19 complications. In early February 2021, the random lengths composite (a measurement of lumber price performance) was up 188% from last year, trading at $983.80 USD per thousand board sheets.

Developers, who typically sell homes pre-construction several months or years in advance, find themselves in a bind.  It’s become an uncertain balancing act between selling homes and protecting profit margins against the rise in material costs.

Despite the new housing industry’s challenges related to COVID-19, the overall amount of single-family home construction in Canada has not slowed down.  The amount of single-detached housing being built in 2020 was 6% higher than in 2019.  According to RBC Economics, the nationwide resale housing inventory in Canada is at the lowest point on record.  Buyers are finding higher prices and less inventory to choose from which leaves many with difficult choices to make.

It’s unprecedented times for the Canadian housing market as supply struggles to meet demand and buyers try to figure out what to about purchasing a new home.

 

In conclusion

 

The bottom line is that the cost of building a home is tough to estimate until you sit down and start pricing things out.  The location, the design, the construction materials and the builders you choose all play a huge role in the total price.  Speaking with a real estate agent or contractor can give you a better understanding of what to expect based on your location and wants. There’s so many factors to consider, but one thing’s for sure, careful planning is the key to achieving your dream home within your budget.