Everyone knows that building a condo can’t be cheap. But how much is it in reality? Before you make that purchase, you should learn all the important costs and requirements that go into the whole process. Our housing experts got you covered with all the different factors and that go into building a condo through this guide.
Increase in Real Estate Prices
If you happen to be looking into building condo developments, it is evident how fast the real estate market is growing.
And with the growth of the real estate industry comes the rise of government charges and everything else. Suppose you’re in a city with a lot of people, that means more units to sell but also more units to build. In a city with fewer people? Less money to spend and less money to earn.
The reason for this increase is the surging land prices. The exact values will vary from region to region, but for the Greater Toronto area, you will see consistent increases.
With this in mind, and the demand and supply chain, the purchase price of condos is increasing rapidly along with the costs.
Costs Involved in Building a Condo
Although the developer only gets a small portion of the profit, there is more on how much it takes to build a condo.
Even when you’re engineering a simple condominium composed of a few units, the expenses coordinated with these are nowhere near budget-friendly. You can expect about an average of $102,000 to $240,000 of development costs per unit. This cost excludes land costs and more.
We mentioned the construction costs, which consist of the carpenters, the electricians, painters, and plumbers. Unless you want to do them all by yourself, it costs about $85 per square foot to build.
Contractors are pricey, and they would typically charge about $67,000. In fact, the development of a two-floor, single-unit property can cost about $484,500 in total.
(Cutting cost in real estate? Then, you should check out the top downsizer precondos in Toronto here, as well)
One of the biggest reasons behind the increase in land costs is parking. But there are only a few of these parking lots available, so developers are now fighting for the same building sites. Typically, a developer tries to outbid other developers and reduce their profit margin to get the best site. This is precisely the reason why a lot of commercial spaces are occupied by condominium developers.
To give you a better idea, we suppose it’s worth saying that the cost of a condominium site in Vancouver is similar to that of Toronto.
How much does it cost to build a condo? For starters, a site could sit at $200 per sq ft. Keep in mind that this amount is based on the buildable square footage. This means it doesn’t include patios, wetlands, yards, etc. When you think about this, you can expect the land estimates to easily reach the high $200s.
Hard and Soft Costs
Construction on a real estate development will also consist of hard and soft costs. What are these? Let’s take a look.
Hard costs refer to the amount a developer needs for physical construction. Examples include the site itself, labor and materials. With hard cost on its own, the condo prices could easily go over $330 per square foot.
For example, here are the hard costs and estimates of a condominium project in terms of stories in a building:
To top off the fact that one can’t just get access to such big amounts of money, the price estimates of the land cost and other factors are increasing drastically. There are no shortcuts to cutting down the cost of the average hard costs, regardless of whichever city one might be in.
Introducing the soft costs, which are all the development charges separate from the cost to acquire the condominium building and services for construction.
Cost estimates under this section of a development project would typically include sales and marketing, realtor commissions, architectural price, and permits for land purchase pre-construction.
If we were to specifically consider Toronto, they have another cost to add to the list, too.
The average development cost of a single-bedroom unit sits around $17,644 per unit, with the estimate of the total soft cost in Toronto per square foot at around $150.
One of the overlooked estimates in a condominium project is the government fees and cost. This is a hefty fee to forget because the government estimates for new condos are approximately $122,800. That makes the government fees add up to estimates around 23.9% of the total price of the condo project itself!
(Wondering which between building a house and condo is cheaper? Then, you should know the difference between condo and housing here)
Where Does It Come From?
Why do government fees exist?
This fee is designed to ensure that the developers place enough green space within their condo development plans. That is, the services of builders include dedicating at least 5% of land towards green space . But in a city like Toronto, this is a huge construction challenge for the builders and contractors alike.
To solve such a problem, developers end up paying a government cost to build the condominium. This eventually raises the development cost of a builder and contractor.
This fee also affects the cost per square foot calculation, as it’s another cost that developers have to pay to ensure that the construction project in the city will be completed.
Other Contributing Factors
While it is true that the factors above affect the cost of a condominium, also note that the developers themselves have a lot of control over this price, too. What we mean is that developers of condos have to create a pro forma.
The pro forma allows them to understand and manage the land acquisition, construction costs, pre-construction costs, development costs, and basically the overall expenses of their project.
As a pro forma tends to consider “what if”s and influence’s a developer’s decisions, it have a big impact on the average cost of the condo projects. Even with so many costs and contributing factors, the developers still sit at a slim profit margin.
Of course, one can’t factor in the average cost of building a condo without thinking about the labour. Nowadays, labour prices of contractors and builders are steadily increasing.
The cost of paying the contractors and builders greatly depends on the building itself, too. So you have to be ready to pay that contractor before going into a project!
Apart from your contractor, another factor which you have to take into consideration would be the location of your building. One can almost say it’s all about location. A spot with high land value and high demand will most likely command a higher price tag.
How in-demand the location will be with competing developers is also a factor. The greater the competition at a certain location, the higher the other developers will bid.
One of the main reasons why people tend to gravitate towards a condominium is because of the amenities. From the quality of the amenities to the number of amenities present, it’s no doubt that this will be quite the cost.
(Finding a great real estate plan? Well, you can also check our list of Canada’s condo amounting more than 10 million dollars here)
Other factors one could look into that will affect the average price to build a condo are the following:
Going through the entirety of condominium projects is quite daunting as the figures can be staggering. However, one needs to know just how much it is before investing in such a costly project.
Our team hopes to have equipped you with all the information on how much does it cost to build a condo costs. Remember that it’s more than just the hard costs. Don’t forget easily overlooked extra amounts such as government fees and the location.