The price of building a new house and the price buyers ultimately pay for it can be very different. In Vancouver, that difference is larger than anywhere else in Canada, according to a new study from the Fraser Institute.
The study, released October 27, examined new single-detached homes across 33 Canadian census metropolitan areas between 2018 and 2025.
It found that new homes in Vancouver sold for an average of 4.7 times their estimated construction costs, compared with 2.0 times in Toronto and 1.9 times in Calgary.
Which Canadian Cities Have the Biggest Price Gaps?
Vancouver recorded a 367.4% gap between average selling prices and construction values, the largest among the cities studied.
Four of the five cities with the highest price-to-construction-cost ratios were in British Columbia.
- Vancouver: 4.7 times construction costs
- Victoria: 2.4 times
- Chilliwack: 2.3 times
- Abbotsford-Mission: 2.2 times
- Kingston: Approximately 2.0 times
Other major Canadian cities recorded smaller differences:
Credit: Fraser Institute
- Toronto: 2.0 times
- Calgary: 1.9 times
- Ottawa: 1.8 times
- Winnipeg: 1.6 times
- Halifax: 1.6 times
- Montreal: 1.5 times
Across the cities studied, new homes sold for approximately 1.7 times their estimated construction costs.
At the other end of the spectrum, Lethbridge, Alberta, and Drummondville, Quebec, recorded the smallest gaps, at just 11.1%.
Why Are Buyers Paying So Much More?
The researchers compared average home sale prices with building permit values, which they used as an estimate of physical construction costs, including materials, labour and construction-related overhead.
The difference is not necessarily builder profit. According to the Fraser Institute, several factors contribute to the difference:
- Land prices and zoning restrictions: Limited developable land and rules restricting what can be built can drive up land values, particularly in desirable urban areas.
- Development charges and taxes: A separate 2025 Altus Group analysis cited in the study estimated development charges of $180,300 per home for a typical low-rise development in Toronto and $97,400 in Vancouver, compared with $9,900 in Winnipeg.
- Lengthy approval processes: Municipal approvals can add financing, legal and planning expenses. The study cites estimated approval timelines of 25 months in Toronto, compared with 10.1 months in Winnipeg and 3.4 months in Edmonton.
- Developer margins and competition: Builder returns also contribute to the difference. Limited competition among developers could further increase prices. The researchers also point to housing demand. When demand rises but restrictions or other barriers prevent builders from adding homes quickly enough, prices can remain substantially above construction costs.
Austin Thompson, Fraser Institute senior policy analyst and study co-author, said:
“In markets with significant gaps between home prices and construction costs, there is a strong case to closely examine how policy factors may be contributing to higher prices for Canadian homebuyers.”
As the study concludes, “These findings clarify that construction costs are only part of the story behind new-home prices in many Canadian CMAs.”
The researchers did not calculate how much each factor contributes to the price gap.
The Gap Between Sale Prices and Construction Costs for New Homes in Canadian CMAs, 2018–2025