b'CONSTRUCTION MARKETthe case, states Jeff Murva, chairmanpanelists was that the hesitancy to startCondo building costs have increased by of TCA. He adds that when escalatingprojects in 2022 could continue to affectabout 20 per cent compared to the same material pricing is overlayed with higherthe construction market for some time.time in 2022. These costs are now rising interest rates, it causes private-sectorhigher than real estate values, which construction buyers to re-evaluate theThe discussion during the session alsois resulting in many projects no longer profitability of their projects. included the pause in new projectsbeing economically feasible. Building construction, whetherwhich began in mid-2022 and concernIssues driving condo project delays are expanding a current facility or startingover the construction buyers wait andconsistent with issues impacting other a new project, typically involves asee attitude. Panelists agreed thatsectors, including increasing labour costs construction loan. Any remaining loanthere are currently no signs that interestdue to low unemployment, continuing debt when the project is complete isrates will drop, or pricing will move backsupply chain problems, and soaring rolled into a mortgage on the property.towards pre-pandemic levels. Supplyinterest rates. Urbanation forecasts now Rising interest rates have pushed thechain issues are now not about materialsee most or all of Torontos future condo real cost of mortgages up 50 to 100being delivered to a job site on time butprojects being put on hold. This impacts per cent compared to rates a year to 18instead, whether the materials can bethe condo market now and in the future, months ago. This seriously affects profitsourced anywhere in the world. considering increased immigration and in projects. the provinces target for new homes to A 12 per cent increase in constructionbe built.Since the summer of 2022, the costcosts in 2022 and a forecasted increase of money and escalating pricing hasin prices in 2023 led to a discussionLooking ahead, Mollenhauer points resulted in a pronounced pause inon inflation and lending practices ofout that one solution to the projects starting new projects, particularly infinancial institutions in this volatileon hold issue is stepping outside of the ICI sector. This pause is occurringeconomic time. One thing panelists allcontract terms and having buyers and because construction buyers are waitingseemed to agree on was the uncertaintycontractors find ways to make projects until interest rates and material pricingof whats ahead. work for both parties. Most importantly, stabilize or come down. Starting newsharing the contract risk between the projects paused just as prices forCONDO EXAMPLE two parties could be the way to see more glass, aluminium, electrical and otherCondominiums are a good exampleprojects move forward.materials increased from 15 to 18 perof delayed projects. A recent online cent year over year, says Murva. Thesearticle provided results of an analysisThere is no simple fix for this new price increases are a result of globalconducted by real estate research firmreality. However, lower pricing and demand. It seems pricing stability wontUrbanation which found that developersinterest rates, as well as a more stable come for some time yet.supply chain, are going to take time could cancel the construction ofto sort out, says Mollenhauer. Both Labour costs are another factor, addsapproximately 5,000 new condominiumbuyers of construction and contractors Murva. The construction industryunits in Toronto in response to risingare going to have to get creative to meetcompleted collective bargainingmaterial and labour costs. this challenge.agreements with the trades in June of 2022. The agreements include significant labour cost increases in the coming years.As well, says Murva: The construction industry is also challenged with the cost and time necessary to achieve municipal approval for projects. Development and permit fees are escalating and the time to get project approval continues to grow exponentially. Municipal processes are delaying project starts and, in extreme cases, causing projects to be cancelled. These increasingly difficult challenges are occurring after the province announced its objective to build 1.5 million more homes in the next10 years.During TCAs CEO Breakfast at the 2022 Buildings Show, a panel discussion on the economic outlook for construction touched on the issue of delayed projects. The consensus among BUILDERSDIGEST Quarter 1 202335'