Ask Rob: The Rising cost of custom homes

Everything comes with a price.

When you are planning your custom home with your architect or draftsmen remember that it costs money to have the nice things in life.

More and more clients or perspective clients come to me and say they are shocked at some of the prices that contractors have given them on their custom home project. Since the recession, I have found that perspective clients came to us (general contractors) under the impression that custom homes and all there luxuries had gotten cheaper. It?s not true; actually the price for custom homes has risen since the recession started. There are a couple of things that have attributed to this;

• ?? ? ??Taxes. Taxes have changed in the province of Ontario, with the HST coming in we now are charging tax on all parts of the house. This has driven the cost of custom homes up by thousands of dollars by itself.
• ?? ? ? ? Material. The raw material for custom homes has gone up since the recession. When the crash of 2008 happened a lot of the businesses that supplied material to the construction industry either downsized or went out of business. This drove the price of raw goods up instead of down. With less competition and less product on the market then the price of products always goes up.
• ????????? Construction Industry itself. The industry is under a recession only in some parts of the province. In a lot of places the industry has maintained itself or has even grown. Even though there are more contractors looking to build houses, there seems to be more houses to build.
• ????????? Baby boomer generation. With the large baby boomer generation reaching retirement age, it has created its own bubble of growth that is fueling the construction economy. This boomer generation is the largest and wealthiest group of people to ever reach retirement age and is generating endless jobs in the construction industry in certain parts of the province.
• ????????? Clients asking for more service. The boomer generation wants service and not just someone to build them a house. Companies are increasing their office staff to keep up with client demand for personnel service. As you increase staff so goes your overhead, as your overhead increases so do the cost of doing business. Contractors now are hiring interior designers to help their clients work through the endless options that you can find in stores and on the internet. You used to just hand a client a bill, now they are asking for a breakdown of bills to understand where the money goes and were they are with payment of the hold backs. More time now has to be spent with face time with clients and answering their emails and phone calls.
• ????????? Building code changes. The building code in Ontario has gone through a radical change this year. Energy efficiency which was an option for people that wanted to pay the higher price is now part of the building code. This has drove the price of custom homes up, with home owners being told they have to have more insulation installed throughout the home, higher efficiency furnaces installed and HRV?s as a standard piece of equipment. It is a good thing that the province is working toward more efficient home, but it raises the cost of your home when you build it.
• ????????? Wsib premiums and insurance costs have risen. Insurance for general contractors, the building of the home and WSIB premiums have all been rising every year. This means that the cost of doing business is ever increasing.
• ????????? Modern convinces. With the explosion of technology to run your home with computer software growing every year it has forced contractors to install a lot of extra wiring for electrical and structured wiring for audio, video, automation and internet. With in-ceiling speakers, audio controls on the walls and home theatres the costs keep going up. Multi headed showers, steam showers, heated floors, residential elevators, dog showers, automatic lighting, LED lighting and many more convinces that never existed before are driving the price per square foot through the roof.
• ????????? Internet and TV exposure. With the use of the internet and home shows on television showing you the latest and greatest things in homes, people are exposed to things that they never would have thought that they needed before. So the more things that you want in your home the more it will cost to build it. It used to be that your selection was limited to what your architect or builder had used before, now the possibilities are endless.
• ????????? Being Green. With everyone thinking about the environment especially when they are constructing their new home, home owners are now actively looking for better options then the traditional ones. This is a wonderful trend that is well over due in home building. The only problem is that being green tends to cost the green. Products that are usually green tend to be a higher end product and last a lot longer, with this comes an increased price tag. It also usually means that there are less suppliers of the product which also allows them to keep the price tag higher.
• ????????? What used to be luxury is now the norm. Granite counter tops were always a luxury that you found in high end kitchens. Now all kitchens in new homes are granite and almost all bathrooms have granite tops for their vanities. Vinyl floors used to be the norm for a lot of bathrooms and laundry rooms. Now it is tile with heated floors underneath.

Like everything in life if you want the finer things in life they come with a price. You would be surprised, maybe even shocked on how little general contractors actually make on building a custom home. If you do your research before asking a contractor for a budget you will be able to avoid sticker shock. Just remember that the more things you want in your house the more it will cost in the end.

When you are planning the budget for your custom home try this simple little routine. Make a list of all the things you want in the house, no matter what it is and how much you think it will cost put it on the list. Then break down the list so that you have several columns for example;

Hardwood floors	Large Kitchen	Geo-thermal heating	Back up gas generator

If you make a list like this then you should be able to help design your budget and get the most value out of your custom built home. This will also allow your general contractor to give you a price on your custom home that is broken down.

This will allow your general contractor to put the first two columns together for your budget and give you the last two columns as options. This way you can stay focused on what you want in the house with the budget you can afford.

We would love to help bring your dream custom home to life, on budget and on time.

Rob Abbott

Operations Manager

Village Builders Inc.

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