In this time of economic uncertainty, many people are concerned with their building plans for the upcoming year. We get many questions asking how tariffs will affect the price of new home, cottage, and boathouse construction.
While certainly no one can predict what will happen or the net effect that tariffs may have, it’s important to look at it from a realistic perspective.
The most important thing to consider during periods of economic uncertainty is that the public’s response typically has the greatest impact on the economy. The panic of what might happen is often far worse than what will actually happen.
Let’s look at the potential of these tariffs from a mathematical point of view.
Firstly, United States tariffs on Canadian products have no direct impact on the pricing of building materials in Canada. What does affect us, is the counter-tariffs imposed by the Canadian government.
So, let’s take a look at what percentage of new construction cost is exposed to the possibility of tariffs. To start, it’s important to note that at least 50% of the cost of a new build is labour.
Working from the bottom up…
Foundations are made with cement that is batched locally and mixed with aggregates that are also sourced locally, so no tariff issues there.
Lumber costs heavily influence home framing, which could be subject to tariffs. However, in 2023, Canada exported 11.5 billion in wood products to the U.S. and only imported 3.4 billion. Most of our lumber still comes from Canada, and if tariffs are placed on U.S. lumber, Canada should have more than enough capacity to provide us with alternatives.
Moving on to finishes—
Image by New Copper Photography
Shingles are primarily manufactured in the U.S., so this could be one factor impacted by the tariffs. As for siding, there are many great Canadian options, including stucco.
Most tile and flooring come from overseas. While some manufacturers are based in the U.S., there are plenty of options available elsewhere.
Plumbing fixtures are also commonly made in the U.S. While they can be imported from other countries, this may pose a challenge depending on the specific fixtures you prefer.
Light fixtures generally come from overseas, but other electrical supplies often are manufactured in the U.S.
So, where does this leave us?
Shingles, plumbing fixtures and some electrical supplies may be the only places where tariffs are unavoidable. While I haven’t covered every detail of a new build, we’ve addressed the major cost areas. Those three things don’t even account for 10% of building material costs.
For the sake of exaggeration, let’s say the worst-case scenario is that we’re stuck paying tariffs on 20% of building materials.
With materials accounting for half the cost of a new build, only 10% of the overall cost is exposed to a 25% tariff. This results in a 2.5% increase in the cost of the build (keeping in mind that this has been rounded up for dramatic effect).
The average increase in the cost of building in the last 10 years has been around 5% per year.
Yet somehow, all the factors that influence an increased cost rarely make the news. If tariffs weren’t being discussed, the average person likely wouldn’t even notice an increase.
I’m a second-generation builder, and I’ve been in this business for over 2 decades. I’ve yet to see a year where building prices are cheaper than they were the year before.
One thing that has always been true about building—
The best time to build was last year, and the second best time is today.
What we can really learn and apply here is making sure that we’re supporting Canadian companies as much as possible. That’s good for all Canadians, no matter what industry you’re in.
