The price of a new home reflects more than just the cost of a building.
asserted
price → reflect → building
It also reflects land value, homebuilder profits, taxes and government fees imposed on new homes — and more.
asserted
It → reflect → homes
Given that homeownership remains a daunting challenge for many Canadians, these housing cost drivers deserve close attention.
asserted
drivers → give → attention
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.
asserted
difference → compare → cities
For example, from 2018 to 2025, new single-detached homes in Vancouver sold for an average of 4.67 times their estimated construction cost (as reported on their building permits), by far the highest differential among the 33 metropolitan areas we examined.
asserted
we → sell → areas
While Vancouver is an outlier, British Columbia cities dominate the top of the rankings.
asserted
cities → dominate → rankings
Victoria had the next-highest differential, with new homes selling for 2.39 times their estimated construction cost, followed by Chilliwack (2.29 times) and Abbotsford-Mission (2.23 times).
asserted
homes → have → Chilliwack
Several Ontario cities also had relatively high home sale prices compared to their estimated construction costs.
asserted
cities → have → costs
Over the same eight-year period, Kingston had the highest differential, with new single-detached homes selling for an average of 2.04 times their estimated construction cost.
asserted
homes → have → cost
Meanwhile, in some of Canada’s fast-growing cities, new homes sold at prices closer to their estimated construction cost.
asserted
homes → grow → cost
For example, new single-detached homes sold for 1.94 times their estimated construction costs in Calgary, 1.79 times in Ottawa-Gatineau, 1.61 times in Halifax and 1.11 times in Lethbridge.
asserted
homes → sell → Lethbridge
Of course, homebuyers should expect some difference between sale prices and construction costs.
asserted
homebuyers → expect → prices
But large and persistent gaps can mean that homebuilding is not keeping pace with demand, causing buyers to compete over a limited number of homes and bid up prices.
asserted
buyers → mean → prices
The gaps can also reflect taxes and government fees that push prices higher.
asserted
that → reflect → prices
Our analysis cannot precisely establish why home prices far exceed construction costs in some cities.
asserted
prices → establish → cities
But where gaps are large, we should scrutinize government policies that may push up house prices, including zoning rules that limit where homes can be built and what types of homes are allowed, lengthy approval processes for new housing developments, and government fees on new homes.
uncertain
types → scrutinize → homes
For example, even after the federal government provided taxpayer dollars to cut municipal charges on new homes, Toronto still levies fees of more than $50,000 on each new single- or semi-detached home.
asserted
Toronto → provide → home
In Vancouver, even after permit processing times improved substantially, the city reports that permits for new single-detached homes still took more than five months to process.
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permits → improve → months
Again, these added costs and delays can make new housing more expensive and harder to build.
asserted
housing → add → ?
Governments cannot control every factor that pushes home prices above construction costs.
asserted
that → control → costs
But if they allow more land to be used for homebuilding, permit a wider range of housing types, streamline housing approvals, and reduce the taxes and fees on new homes, governments can reduce their own contribution to these gaps and improve housing affordability.
asserted
governments → allow → affordability
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.
asserted
prices → prioritize → costs
The Aporia
