What percentage of the total costs are due to materials? I thought that land, labour and financing costs typically add up to at least as much as the material costs.
Hi Mongo,
Sorry for the delay to answering your question, hopefully this will be satisfactory:
Every project is a bit different, but materials are the primary cost incurred by developers when constructing a condo. This is a ballpark figure, but depending on the project it would be in the 45% range of total costs for materials (give or take approx 5%-10% depending on a whole range of issues). There have been severe increases in construction materials costs over the last year and a half which has threatened the economic viability of some condo projects - essentially if pro-formas were done two or three years ago and pre-sales started about two years ago and shovels aren't in the ground or are only just in the ground now, the builder has taken a huge risk and it's highly unlikely that they planned for the costs that they now have to absorb when pre-construction sales were launched. The condo industry is very high-risk and the longer one waits to commence construction the more risk that is taken on - one of the reasons why I'm puzzled when some people suggest delays on the builders part are intentional - the builder wants to get in the ground and complete the project as soon as possible in order to manage risk. Unfortunately there are shortages of labour in the GTA construction industry and developers are having trouble allocating labour to new projects, thus the delays...
Financing as you suggest is important, but is usually under 5% of total costs, but this depends on the builders cash flow, credit rating and risk (financial institutions across North America have tightened up on credit significantly the last few months which has created some problems for Toronto condo builders - i.e. hitting pre-sales targets doesn't guarantee the bank will release credit anymore) as well as how much money the builder is actually putting in up front.
Land costs are typically in the 10% to 15% range depending on location and the size of the project (One Bloor may have a lower % due to the size of the project - a smaller project would have lower material/labour costs, but the land deal would be the same, thus a higher percentage).
All figures are of course site specific as every project is different in terms of the land deal, negotiated labour contracts, materials, sales and marketing, financing etc...
