Repairs, Maintenance and Renovations
Rising Costs of Raw Materials and Delayed Projects
From the Volume 29 issue of the CCI Eastern Ontario Condo Contact Magazine
Why have prices for raw materials and construction gone up?
We’ve seen the headlines time and time again – prices of raw materials have surged during the pandemic. The new reality of staying at home has created a pent-up demand for home renovations and property restoration projects. Condominium corporations may have considered getting new fencing, replacing old roof shingles, or undertaking a balcony restoration project. However, in the process, you may have noticed that the same job that would have cost you $50,000 a few years ago has now doubled or more. The supply constraint for materials and labour has developed over the years and COVID-19 has merely been a trigger to the high prices we are seeing today.
We are seeing the largest price increases in iron ore (the main components in steel and rebar), copper, and lumber. During the last US presidency, tariffs were imposed on certain aluminum products coming in and out of Canada, creating an upward pressure in prices. This summer, iron ore futures hit all time highs on multiple exchanges at over $230 a ton. Copper had also hit a record high in May of this year at $11,000 a ton – nearly doubling year-over-year. Lumber had the biggest sticker shock this year with prices hitting nearly $1,700 per thousand board feet, up 355% over the past year. To add to this, sawmills have had trouble keeping up with demand, and pine beetle infestations along with forest fires have dwindled Canada’s lumber supply. In addition to increased prices, you can also expect longer lead times as shipping delays are being seen both by land and sea.
Ontario is also experiencing a labour shortage in the construction industry. In the next 10 years, the construction workforce will need to hire and train 100,000+ new workers to make up for those who will retire and to keep pace with demand. A quarter of Ontario’s construction workforce is currently made up of immigrants, and travel limitations have reduced the pool of available skilled labour. On top of that, due to the stigma around skilled trades, some immigrants perceive construction as a less attractive career path. Productivity has also slowed down with the health & safety restrictions put in place on worksites to limit the spread of COVID-19.
Everything is expensive and delayed! What do I do?
The severity of the pandemic was and continues to be hard to predict, and for that reason, you should always plan for the unexpected. If you are managing a condo, it’s important to have a Preferred Vendors list where you can obtain several quotes. If your condo has experienced a flood and supply chain disruptions have affected your primary supplier, your secondary supplier may be able to get on site faster and prevent any further damage. It may also be a good idea to have small amounts of materials for spot jobs in your inventory for quick fixes as needed. It’s important to note that stockpiling should be done in moderation. Those same materials that have been put away for several years can become functionally obsolete as technology can change over time. You can typically rely on the contractor at the time of the project to supply you with the best material and at the best prices.
If you have upcoming wood projects in the pipeline, there is good news for you: lumber prices are in fact stabilizing!
Since peaking at just under $1,700 per thousand board feet in April this year, lumber prices are now sitting in the mid $500s. That is nearly the same as pre-COVID levels, where prices were floating near the mid $400s. If you have a delayed wood fencing project or need to replace your roof sheathing, now may be the time to get in contact with your contractor and get started. Note: we are only seeing the price drop in lumber at this moment, with other raw materials still nearing all-time highs. Some contractors have now also put a shorter limit on how long their bids remain valid – from roughly 60 days down to 30 days, in order to avoid being exposed to the volatility of material prices. This is something to keep in mind if you are looking to capitalize on lower prices.
To better maintain your condo’s budget for future repairs, contact your reserve fund planner and have your report reflect a more current model. For peace of mind, have an up-to-date appraisal done on an annual basis to ensure that your assets are adequately protected. To better manage owner expectations, make sure that you have a professional and qualified management company to oversee the overall financial and day-to-day operations of your condo. Lastly, communicate with one another! Nothing is better than efficient communication to tackle any problem.
William is the Business Development Associate for Normac, specializing in insurance appraisals. He has a Bachelor of Arts in Economics. An active member of thecondominium community in Ontario, William is involved in the Canadian Condominium Institute (CCI) Golden Horseshoe, Grand River, Toronto, and Eastern chapters. He strives to deliver a high level of service by ensuring the appraisal needs of his clients are met with the utmost satisfaction.
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