The Economic Effects of the COVID-19 Pandemic on Canadian Construction

Disruptions to Canada's construction industry due to the COVID-19 pandemic may have cost contractors most or all of their profits for 2020.

Until the country reaches herd immunity with the rollout of vaccines, physical distancing requirements, disinfecting, and handwashing will remain in effect. The loss of productivity resulting from those measures and a slowed materials delivery system means that it has cost contractors 10-12%. That is roughly the equivalent of profits and administrative overhead on most jobs.

And with this new construction season, the continued materials supply issues could cause significant price increases for consumers. Four of five contractors, entrepreneurs, and renovation companies surveyed say problems continue with delivery times and lack of inventory with suppliers.

The estimated increased cost of construction materials is 20-22%. Contractors are urged to be transparent about bids, especially deadlines, and to include price adjustment clauses in contracts.

The costs for lumber, cement, and other construction materials are constantly in flux. Still, all prices have been more volatile over the past year with factory closings, trucker shortages, and supply chain chaos caused by the pandemic. Shortages in supplies mean higher costs and delayed construction projects.

The surge in lumber costs alone has added more than $30,000 to the price of a new single-family home. The recent price of lumber is $1,000 per thousand board feet. That is about 120% higher than the April 2020 cost. The high lumber prices are making it difficult for some builders to take advantage of the strong housing market expected to continue this year.

The construction sector, overall, is recovering with a lot of increased activity. Still, escalating construction costs and project delays persist. According to the Canadian Home Builders’ Association, this will affect both home buyers and the broader economic recovery. Delays due to a lack of available lumber could have financing implications and other milestones required for closings. The Canadian Home Builders’ Association is working with lumber producers to see how they might ramp up production to alleviate this problem, which also involves various trade disputes.

Despite all the bad news, Canada's vaccine rollout is going well, and the government promises mass vaccines for Canadians by September, which may be good news for the construction industry and the economy as a whole.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.

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