Cost of New Home Construction Study. Presented to the CHBA Urban Council March 5, 2013

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Pearl Craig
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1 Cost of New Home Construction Study Presented to the CHBA Urban Council March 5, 2013

2 Some Context Regina Our City The HBA The 5 W s of the Study Why What Where Who When The Study Outcomes What are next steps Agenda

3 When you think of Regina & Saskatchewan what comes to mind

4 Regina Today Population 213,000 Medium Age 37 years Close to the geographic centre of North America 3.9% GDP growth, highest in Canada according to the Conference Board of Canada Lowest unemployment rate in Canada 12,000 new jobs by 2015

9% GDP growth, highest in Canada according to the

5 Regina Today Key Industries Energy & Environment Transportation & Warehousing Information Technology Business & Professional services Steel & Manufacturing Agri-Business Finance, insurance & real estate Arts, entertainment & culture Public Administration

services Steel & Manufacturing Agri-Business Finance, insurance

6 Cost of Living Regina Today At an average of $35,000 Reginian s boast the highest discretionary income at nearly every level compared to other Major Canadian Cities 5 th best place to live in Canada MoneySense Magazine in 2012 In fact, an average family earning $75,000 a year keeps $21,000 more of there income than a family in Southern Ontario

th best place to live in Canada MoneySense Magazine in 2012 In fact, an average family

7 Regina Today

8 Who we are

9 Cost of Building a New Home

10 The 5 W s of the Study Why Stats Canada NHPI Regina Canada Highest increase Canada since 2007 Consumers & Citizens perception that margins are extremely high for Developers and Builders Every CHBA meeting, at some point, a discussion about a gas sticker for housing NAHB has tracking building cost since 1969, creating a wealth of data

extremely high for Developers and Builders Every CHBA meeting, at some point, a

11 The 5 W s of the Study Why

12 The 5 W s of the Study What Explain the costs of housing construction Identify what drives cost increases Relate to the broader market trends in real estate, housing and the general economy

13 The 5 W s of the Study Where/When/Whom Where City of Regina 1,300 sq ft Bungalow 1,700 sq ft Two- Story When Comparison of 2006 to 2011 Whom Cohort of Land Developers and Builders University of Regina Centre for Management Development

Comparison of 2006 to 2011 Whom Cohort of Land Developers

14 Perceptions of Housing Margins Not Part of Study We asked friends, family, contacts about their perceptions of the profits new housing

15 Perceptions on Housing Margins What is the profit margin for a builder? 15% 100% 50% 25% 35%

16 Perceptions of Housing Margins What is the profit margin for a lot? 25% 35% 50%

17 Perceptions of Housing Margins What is the most expensive part of a house? Materials Builder Profit Lot Labour Gov t Fee

18 Study Findings 4 Drivers of Cost 1.The Cost to Develop residential land has doubled in the past five years, with the most significant cost driver raw land; 2.Government fees and levies have risen by an extraordinary amount; 3.Higher Sub Contractors Fees & Material mixed with higher construction standards; and 4.Consumer demand for amenities and quality surroundings

19 4 DRIVERS of COST Acquisition of Land

20 4 DRIVERS of COST Land Costs 209% Land Development Costs Acquisition of Land per lot Planning & Design 109% Onsite & Landscaping 124% Government Fees & Levies 201% Carrying Costs -70% Total Costs of Development 100%

109% Onsite & Landscaping 124% Government Fees &

21 4 DRIVERS of COST Government Imposed Costs, especially Municipal Fee s

22 4 DRIVERS of COST Government Imposed Costs, especially Municipal Fees City of Regina Service Agreement Fees $40,000 per ha $238,000 per ha ( $242,000 per ha) City of Regina Planning & Sustainability Fee Structure Concept Plan Approval $4,400 to $49,900 Concept Amendments $1,290 to $16,600 Building permits +38% 10% dedicated to Green Space or value in kind

23 4 DRIVERS of COST Sub Contractors

24 4 DRIVERS of COST Sub Contractors Labour costs up 20% compared to construction price index of 47% Foundations/basements driven by higher concrete costs and subcontractor fees Framing relatively stable compared to other components Lumber has not been a driver Plumbing, heating and electrical driven primarily by subcontractor fees

25 4 DRIVERS of COST Consumer Expectations

26 4 DRIVERS of COST Consumer Expectations

27 Average Increase Cost for Home Build Increase Lot Cost 50% Construction Cost Planning and Fees 94% Foundation/Basement 42% Driveway 34% Framing 23% Roofing 21% Plumbing/Heating/Electrical 49% Windows/Doors 77% Drywall/Insulation 33% Exterior 64% Interior Finish 44% Builder Overhead 77% Construction Cost Subtotal 46% Total Cost Lot & Construction 47% Average Selling Price 55%

28 Average Increase Cost for Home Build Increase Lot Cost 109% Construction Cost Planning and Fees 13% Foundation/Basement 46% Driveway 67% Framing 19% Roofing 59% Plumbing/Heating/Electrical 49% Windows/Doors 14% Drywall/Insulation 52% Exterior 35% Interior Finish 21% Builder Overhead -4% Construction Cost Subtotal 30% Total Cost Lot & Construction 46% Average Selling Price 47%

29 Building Cost to Selling Cost

30 Building Cost to Selling Cost

31 U.S. Historical Data & Trends Average Selling price of new home $9, $26, $70, $183, $226, $298, $373, $454, $377,624 Profit as % of Sales 1949 N/A 1969 N/A 1982 N/A % % % % % %

32 U.S. Cost of Sales, expenses and net profit (loss)% of revenue 19.1% 80.9% Cost of Sales Gross profit margin Gross Profit 19.1% Finance 2.9% Sales & Marketing 6.2% General and Admin Expenses 5.5% Owners compensation 2.5% Net Profit 2%

33 Buried in the U.S. Data When housing prices rise quickly Builder profits are high until everything else catches up 6 year housing cycles Supply & Demand

34 What do we do with this information? More transparency to consumers Clarity of expectations of their builder and their municipality Manage expectations of policy makers

35 Questions & Comments

37 Click to edit Master text styles Second level Third level Fourth level Fifth level

38 Title and Content Layout with Chart Category 1 Category 2 Category 3 Category 4 Series 1 Series 2 Series 3

39 Two Content Layout with Table Group A Group B Class Class Class First bullet point here Second bullet point here Third bullet point here

40 Two Content Layout with SmartArt First bullet point here Second bullet point here Third bullet point here Group A Task 1 Task 2 Group B Task 1 Task 2 Group C Task 1

Commercial Building Valuation Report

Commercial Building Valuation Report INSURED University of Houston - Victoria Effective Date: Expiration Date: Cost as of: 09/2010 BUILDING 1 217 - University Center 77901 Location Adjustments Climatic Region: High Wind Region: Seismic Zone: