Calgary new-home prices run 1.9 times construction cost, Fraser Institute finds

A Fraser Institute study released October 27, The Gap Between Sale Prices and Construction Costs for New Homes in Canadian CMAs, 2018–2025, compares new single-detached home sale prices with building permit values, an estimate of the cost to physically construct a home. From 2018 to 2025, Calgary's new homes sold for an average of 1.9 times their estimated construction cost, above the national figure of 1.7 times; Toronto was 2.0 times and Ottawa 1.8 times, while Vancouver led Canada at 4.7 times.

The widest gaps cluster in British Columbia

Beyond Vancouver, four of the five widest gaps in Canada were in British Columbia: Victoria at 2.4 times, Chilliwack at 2.3 times and Abbotsford-Mission at 2.2 times. Below the national figure were Winnipeg and Halifax at 1.6 times each and Montreal at 1.5 times. The construction-cost measure is the value stated on building permits, an estimate of physical construction cost rather than a developer's full cost.

A gap is normal; the size of the gap is the question

Co-author Austin Thompson, a senior policy analyst at the Fraser Institute, said a home's sale price will usually exceed the cost to physically build it, but in some cities the gap is significant enough to point to other cost drivers — land value, government charges and burdensome red tape — that can worsen the housing affordability crisis. He said markets with significant gaps deserve a close look at whether policy factors are pushing prices higher for buyers, including policies that restrict homebuilding opportunities and taxes and charges imposed on new homes. The study does not claim any single policy is the sole cause of a gap, and a large gap is not by itself direct evidence of developer profiteering.