North York Custom House 3

How Much Does It Really Cost to Build a House in Canada?

While it is always exciting, building a new house often involves a daunting process. The good news is the results are still worth it. This is more so when you achieve the perfect balance between the fittings and features you really want. However, achieving all your goals and still remaining within your budget is never easy. There are way too many moving parts, and the cost of items will keep on changing throughout the construction process .

It goes without saying that when building a home or an investment property, the key factor that affects your decisions is the cost. You want to build something amazing without being ripped off by dishonest tradespeople or custom home builders. This post looks at all the costs you should be prepared for when getting ready to build a house in Canada.

Average cost of building a house in Canada

On average, to build a 2,500 square foot detached house in Canada, you will spend between $720,000 and $890,000. The cost will change depending on where you are building your home. It is also important to note that one of the key factors affecting construction is if you plan on building a predesigned or custom-built home. It is usually cheaper to build a predesigned home. Opting for luxury design elements will also affect the total cost.

Depending on where you live, here are the average costs of building a house in different locations across Canada:

  • Calgary: $190 to $300 per sq. ft.
  • Edmonton: $130 to $185 per sq. ft.
  • Montreal: $165 to $350 per sq. ft.
  • St. John’s: $150 to $350 per sq. ft.
  • Toronto: $250 to $300 per sq. ft.
  • Ottawa: $235 to $375 per sq. ft.
  • Halifax: $90 to $150 per sq. ft.
  • Winnipeg: $130 to $350 per sq. ft.
  • Vancouver: $200 to $350 per sq. ft.

It is cheaper to build a home in smaller cities, towns, and villages. You should also note that the above-average costs do not account for the cost of buying land and the cost of permits. These added costs are the key reason most people end up choosing to do just kitchen, basement or bathroom renovation to upgrade the existing properties as opposed to building a new home.

Cost of building a house in Ontario

Ontario is the largest province in Canada. From 2016 to 2020, the province had a population growth rate of 9.56%. As a result, Ontario has the fastest-growing housing market in Canada. The average cost of building a detached home in the Greater Toronto Area is between $250 and $300 per sq. ft. In Ottawa, the average cost ranges from $235 to $375 per sq. ft. As you can see, the cost varies depending on where you plan on building your home. In the rural areas, the cost is much lower.

The key reason the cost of building a home varies significantly between cities is because of the labour and material costs. Moreover, the specifications/standards of each building type vary. The cost of the specifications between the cities affects the overall cost of construction.

Factors that Affect the Cost of Building a House

  • Land

The land on which the house is to be constructed is the most important factor. It affects the overall cost of building a home. Is the land you want to build on sloping or flat? The selected land can further affect the costs if large boulders under the ground have to be cleared before construction begins.

  • Location

When it comes to real estate, it’s all about location. The cost of building a house will vary depending on whether you want to build in a major city, suburbs, or rural areas. It will cost you much more to build in a city because metropolitan areas are the most preferred places to work and live in.

  • Fees, permits, and inspection

Government regulations in the construction industry are reviewed and updated constantly. When getting your construction up to code, you will come across various costs.

  • Restrictive covenants

There are unique instances where houses have to use specific building materials or particular designs. This is common with protected areas or homeowner associations. These specific requirements will significantly affect the overall cost of building a home.

  • One story or two

It costs more to build a two-story home than a single-story one. This is because additional items will be required for a two-story house, such as extra floors, scaffolding, stairs, and more.

  • Materials used

The materials used will have a significant impact on the cost of building your home. Brick, stone, and vinyl do not cost the same.  

  • Tradesperson

You will need a team of professionals on-site throughout the construction. The professionals include plumbers, electricians, roofers, and more. The labour cost they charge will affect the overall cost of building your home.

  • Your house

Last but not least, the type and size of the house you are building will matter. The more square feet your house will cover, the more expensive it will be. The number of bathrooms and bedrooms will also affect the cost. Will the house be a production home or architecturally designed? Do you need a pool, deck, or porch?

While the list is incomplete, the above factors have the most significant impact on the overall cost of building a home in Canada. All these factors can make a cost difference in the tens or even hundreds of thousands of dollars.

Selecting a Contractor

The next factor that has the biggest impact on the cost of building a home in Canada is the contractor you select. The cost of hiring a builder varies from one builder to the next. Mostly, the cost will depend on the type of work the builder specializes in. Some specialize in production homes, while others do custom-build.

Before hiring a contractor, it is essential that you get quotes from various builders in your area. Doing so will give you a more precise idea of how much construction costs and which contractor offers you the best value. You also need to ask your preferred contractor the following questions:

  • Are you licensed?
  • Are you insured?
  • What is your building process, and why that process?
  • Are you able to build a home that suits my property layout?
  • Do you offer regular updates on the progress of the project?
  • Are your designs and plans flexible?
  • Do you have recently completed homes that I can inspect?
  • Can you provide a few references?

How to Get an Estimate for Building a House

Do you need an estimate? There are two methods you can use to get a ballpark figure of how much you will spend on your home.

  • Construction cost calculators

Thanks to progress in technology, you can get an estimate from the comfort of your home. There are so many cost calculators available online. These tools are great for giving you a rough idea of how much the construction will cost. It is, however, good to remember that these tools don’t provide an accurate quote.

Prior to using a construction cost calculator, know the assumptions each calculator makes. You also need to take the results you are given with a grain of salt.

  • Getting a custom quote  

For a clearer picture of how much constructing your home will cost, you need to get a quote from a builder. Builders take into account the specific requirements of your project, site requirements, layout, size, and desired features, among other things. This helps come up with a more accurate figure on how much the project will cost.

All in all, it is imperative that you get quotes from multiple builders. You also need to note what the quote includes and what extra costs may be. It is good to remember that site costs, driveways, carpets, fencing, and landscaping are often not included in the quote. Needless to say, they can add thousands of dollars to the total cost.

How to Finance the Construction of Your New Home

If you need to borrow money to construct your new home, you will need to get a home construction loan or a self-build mortgage. These loans can be set up in a way that allows you to buy a vacant block of land and build on it within a specified time. The loans can also be used to fund the construction if you already own a piece of land.

The construction mortgages are typically secured by the land and any improvement value. This means if you default on payments, you will lose the land and any improvements you will have made to it. Down payment will be required. This can be about 25 to 30%.

The two types of construction mortgages are:

  • Completion mortgage

With this type of mortgage, the loan will not be transferred until the project is completed. This means you can make changes to the mortgage, like how much money you need. The changes can be made until 30 days before taking possession of the completed home.

  • Draw or progress-draw mortgage

With this type of mortgage, the loan is offered in increments. The builder gets additional funding after passing the inspection of a set stage. The lender usually calculates the total amount of money you will need to pay the builder then allows access to it at defined times.

There are a number of requirements you have to meet before you qualify for the construction mortgage. Some lenders may restrict you to a specific builder, while others may require the project to be completed within a specified time. The majority of lenders will also require an estimate, including the cost of the land when it comes to the construction costs.

In Canada, a home equity line of credit or a home equity loan is the best option when funding a new home. First mortgages will not be offered to people looking to build their houses from the ground up. Lenders will require that you use some equity in the current home you own to ‘secure’ the mortgage for the new house.

Production Homes vs. Custom Homes

Production home builders are major companies that have systemized their home construction process. The beauty of using production home builders is that you get an extensive range of floor plans that have already been priced out and cater to a wide range of budgets from standard to luxury. The drawback is a production home has every aspect finalized before the construction work starts. You will not be able to improvise or change things up as you go.

On the other hand, custom builders are local contractors who pride themselves on personal quality and uniqueness. They are the best choice if you like the idea of having a certain level of involvement in the home-building process. While it is optional, custom builders give you the flexibility and freedom to improvise and change things up as the work is being done. Custom builders are also comfortable working with architects to create unique home plans.

Cost of Building a Kit Home

Kit homes, also known as pre-fabricated homes, are designed and built off-site, then the materials are transported to your property and assembled. The cost of a kit home ranges from $80 to $300 per square foot. That is about $120,000 to $300,000. The cost depends on your selected floor plan as well as the cost of finishes. Generally speaking, kit homes are more cost-effective. They also allow DIY contractors to do a lot of the work themselves.

The cost of a kit home may be affected by the following:

  • The model: A 4-bedroom kit home will cost significantly more than a 1-bedroom kit home.
  • The siding option: Stone, brick, vinyl, and other options are available.
  • The site: Sites that are hard to access or need levelling will inflate the costs.
  • The package: A kit home that includes the bare shell will be cheaper than one that includes everything from air conditioning to floor coverings.

It is always good to get an itemized list of what is included in the cost of a kit home. Does the cost cover everything you need?

Conclusion

There are numerous factors that impact the cost of building a home in Canada. Research your options thoroughly and get an accurate idea of the total costs before construction starts. Planning everything adequately and hiring the right team will guarantee that the project gets finished on time and within your budget.