Vancouver new home prices nearly five times construction cost, study finds

VANCOUVER · The sale price of a new single-detached home in Vancouver was on average 4.67 times higher than its estimated construction cost over an eight-year period, a new study has found. The analysis by the Fraser Institute compared average sale prices with the construction costs reported on building permits from 2018 to 2025 across 33 metropolitan areas. Vancouver's differential was by far the highest in the country, the report said. British Columbia cities dominated the top of the rankings, with Victoria next at 2.39 times the construction cost, followed by Chilliwack at 2.29 times and Abbotsford-Mission at 2.23 times.

Several Ontario cities also showed relatively high gaps between sale prices and construction costs. Kingston had the highest differential in Ontario, with new homes selling for 2.04 times their estimated construction cost. In Toronto, that figure was 1.97 times. "Our new study, which compares the average sale price of new single-detached homes with their estimated construction costs, finds that the difference varies greatly across Canadian cities," the authors wrote. The study noted that homebuyers should expect some difference, but large and persistent gaps can signal that homebuilding is not keeping pace with demand.

In some of Canada's fast-growing cities, new homes sold at prices much closer to their estimated construction cost. The differential was 1.94 times in Calgary, 1.79 times in Ottawa-Gatineau, 1.61 times in Halifax and 1.11 times in Lethbridge. The authors, senior policy analyst Austin Thompson and Addington Centre for Measurement director Milagros Palacios, said the gaps can reflect taxes and government fees that push prices higher, or competition over a limited supply of homes. "In some Canadian cities, both dynamics may be at work," they wrote.

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The analysis cannot precisely establish why home prices far exceed construction costs in some cities, the authors said. They argued that where gaps are large, government policies should be scrutinized, including zoning rules that limit where and what types of homes can be built, lengthy approval processes and government fees on new homes. "On the policy front, there’s clear room for improvement," the study said. It cited Toronto, which still levies fees of more than $50,000 on each new single- or semi-detached home even after federal funding aimed at cutting municipal charges.

In Vancouver, the city reports that permits for new single-detached homes still took more than five months to process, despite substantial improvements in permit processing times. "These added costs and delays can make new housing more expensive and harder to build," the authors wrote. They said governments cannot control every factor that pushes home prices above construction costs, but they can reduce their own contribution by allowing more land for homebuilding, permitting a wider range of housing types, streamlining approvals and reducing taxes and fees. "Policymakers across Canada should prioritize these reforms, but the case for them is especially strong in cities where new home prices are far above construction costs," the study concluded. The research adds to a body of work examining Canada's housing affordability challenges. Your Space Hamilton reported in October that Canada's inflation-adjusted home prices rose 101 percent from 2005 to 2025, far outpacing peer nations like Australia and the United States.

With files from Todayville and Toronto Sun