Supply chain demands impact new home construction
By Lanny McInnes
Date Posted: July 16, 2022
Supply chains continue to be challenged globally, and the impacts continue to challenge Canada’s residential construction industry. Challenges sourcing materials and labour have caused construction delays and have made predicting construction timelines extremely difficult. The result of these challenges has been unprecedented price increases on many construction materials which is adding tens of thousands of dollars onto the cost of building a new home. While these challenges are not unique to Manitoba’s residential construction sector, they have certainly added to the stress that home buyers face.
Many industries had shut down production at various points during the pandemic or had limited production capacity due to lack of labour. This has ranged from lumber mills that supply wood for house frames, to manufacturers that supply plumbing for homes, to computer chips for appliances, to shipping companies that bring goods from overseas, and much more. This created backlogs, delays and uncertainty, scarcity of products, increased production costs and higher shipping costs. This has led to increased prices for building materials as well as production. At the same time, there has been an increase in demand for new homes and renovations globally. Many countries have experienced a housing boom through the pandemic, both in new construction and renovation, putting still more pressure on supply chains for construction materials and products. Manitoba has certainly seen this firsthand with record levels of residential construction activity taking place in 2021.
The Bank of Canada reported earlier this year that production shortages on various goods, such as appliances, plumbing fixtures, windows, as well as shipping bottlenecks at ports all over the world continue to cause closing delays for many builders. The Canadian Home Builders’ Association’s quarterly Housing Market Index (HMI), a leading indicator for builder sentiment in the Canadian residential construction industry, showed that in Q1 2022, construction timelines were delayed on average 10 weeks due to supply chain disruptions.
The combination of slowed production and increased demand has substantially impacted the price to build homes in an unprecedented way. According to CHBA’s Housing Market Index, when combining lumber and other material price increases, the national average construction cost increase for a 2,482 sq. ft. home was up $68,060 per home at the end of 2021. Though working against unprecedented uncertainty in the supply chain, homebuilders are doing what they can to keep construction timelines as close to on schedule as they can — they know that home buyers need to move in, and it is in their own company’s best interests to close on the home on time as well.
Builders and homeowners across Canada and the world are all experiencing these same challenges. Despite these challenges, building a new home in Manitoba continues to be an excellent option for many home buyers. Issues with the supply chain will resolve over time, and with that should come more price and construction schedule certainty. The Bank of Canada predicts the supply chain will start to return to more normal conditions through the rest of 2022—which will be good news for builders and home buyers alike.
Lanny McInnes is the President & CEO of the Manitoba Home Builders’ Association.