It’s been almost 2 years since we last talked about inflation – back in the summer of 2022 the consumer price index had just increased by 7.7% year over ear, with residential construction prices increasing by a whopping 26.5% year over year in Toronto. So where is inflation now and how is it effecting our condominiums?

 

Beyond its more visible day-to-day effects; inflation can have a significant impact on condominium budgets and on the overall health of your reserve fund. Boards, property managers and engineers are grappling with the need to maintain condominium buildings, while minimizing cost increases that many residents cannot afford. Over the past 2 years the consumer price index slowed to an annual increase of 4.3% last year (March 2022 to March 2023) and 2.9% this year (March 2023 to March 2024) (i), with residential construction prices in Toronto increasing 17.6% last year (Q1 2022 to Q1 2023), and 7.6% in this year (Q1 2023 to Q1 2024) (ii).

 

These are still huge cost increases, but how is it impacting us locally? Residential construction price indexes are primarily skewed by new condominium construction prices, as those projects dwarf the repair/restoration construction sector (fixing existing condominiums). Since interest rates have increased, the number of new homes being constructed has fallen – by 12% in Toronto over the past year (iii). Anecdotally we have noticed this has begun to drop the costs of condominium repair/restoration construction projects throughout the Grand River area due to a few factors:

 

1. Reduced new construction is reducing workload for manufacturers (IE Windows) who are now dropping prices, and lead times for items such as insulated glass units are dropping from approximately 10-12 weeks in 2022 to 4-6 weeks now.

2. Fewer new construction projects is reducing workload for labourers, resulting in some construction staff who work in the new construction field to move into the restoration construction sector, reducing wage pressures.

3. Various industries are cutting back on construction spending (financial institutions, universities and colleges, existing condominiums) meaning that trades are offering discounts, or taking on projects at a loss to keep their staff busy.

 

Inflation has profoundly affected the condominium industry in recent years, but recent trends are promising, and we are beginning to see construction projects come in under budget. Although there is no way to eliminate inflation’s influence on your condominium, now may be the time to re-check pricing for that important project you have been considering.