The dream of constructing a garden suite, ADU, or laneway house in the GTA and Kitchener-Waterloo resonates with many of our Clients. Many have valid concerns about rising construction costs and interest rates, and it may seem as though it is the worst time to invest in new construction. We take a closer look at the synergy between sustainable design, long-term cost savings, and the current economic landscape and try to shed some light on the question of “When is the right time to build?”

A Look at Construction & Finance Costs  

Unless you don’t eat food or use gas, you will be aware that inflation has been taking a huge bite out of our incomes over the past year. We saw the generally reported Consumer Price Index rise almost to 10% although it appears to be settling back down in some areas. The much less familiar StatsCan Building Construction Price Index (BCPI) which tracks construction costs reports two back-to-back years of over 25% increases in the cost of residential construction in the GTA. The most recent data suggests that price increases are moderating with the latest 12 month rate of inflation down to 13%.

This means that the same Backyard House that might have cost $350k to build back in 2020, now costs over $575k. Our own experience with Builder’s quotes bears this out.

At the same time, you might have noticed that interest rates have gone up a bit. The current rates we see for 5 year closed mortgages are around 5% – 6%. This understandably has some people wondering if they should press ‘pause’ on plans to build and wait for the cost of borrowing to drop a bit.

So let’s see if that would be a wise decision. Let’s take a typical 2 bedroom Backyard Home that might cost $600k to construct. Assume a 20% down payment of $120k and the monthly mortgage costs (over a 25 yr amort) will be about $2,860.

If we wait a year in the hopes that rates might drop a bit – let’s assume 1% to a 4.25% rate – then the numbers might look like this: Construction costs rise by only 12% (continuing on that optimistic view), then the same building will cost $672k, and if our $120k down payment was socked away in a GIC, it will be worth about $126k, so the monthly mortgage payment will now be $2,950.

So, what do we take away from this little exercise? Unless inflation in construction costs drops really quickly back to 5% or less, or unless mortgage rates drop really, really quickly back to less than 3% for a 5 year closed, does it really make any sense to wait?

What are the odds of construction costs coming down soon? Well, many of the factors that drove them up in recent years such as a shortage of skilled trades, an increasing demand for new housing, and supply chain disruptions, continue. The 1st two don’t appear to going away anytime soon. As for predicting where interest rates will be in a years time – I leave that to wiser fools than me!

Time is Money

Building a backyard home is a multi-step journey. The planning, design, and approval phase before we even break ground can take up to a year, especially if we need to obtain permission at Committee of Adjustment. Once construction starts, it usually takes between 6 to 10 months to complete. Allow some time to tidy up the yard, hang blinds (remember you’ll be looking across that yard at each other) and it’s wise to allow 2 years from when you pick up the phone to call us to moving into your beautiful new low carbon paradise.

How to reduce your costs

Sustainable design isn’t just an environmental consideration; it’s a practical approach to affordability. Here’s how our focus on sustainable design can keep the long-term costs of housing down:  

  1. Energy Efficiency: By employing innovative construction techniques, we can create homes that require a fraction of the energy to heat and cool. We use blower door tests to ensure that your home is made as air-tight and draft-free as possible. Then we add really efficient windows and doors and well insulated low-carbon walls and roof to keep your home warm in winter and cool in these hot summers. Throw in a really efficient Air Source Heat Pump and your costs to heat and cool your home will be a fraction of what you’re used to spending, or what your neighbours who “built-to-code” are stuck with. Maybe that extra $100 – $200 per month can help with that mortgage!  
  2. Low Maintenance and Durability: Our designs emphasize durable materials and construction methods, minimizing maintenance costs over the lifespan of the home. Where practical, we build-in circularity – no not round windows from the 80’s (love those things!) – but the circular economy as in re-usable or truly re-cyclable materials.  
  3. Low Carbon Footprint: By avoiding fossil fuels for heating, the carbon footprint of your new backyard house can be around 10% of that a typical new house or condo. In the making of the house, we choose low carbon alternatives to conventional high-carbon materials such as cellulose insulation instead of spray foam. It’s a forward-looking choice that aligns with a responsible lifestyle and future-proofs your investment.

What are you waiting for?      

Feeling encouraged to get started on planning for your backyard home? The first step is to make sure that the project makes sense for you and your family.   Book an in-person site assessment here . You will receive:

  1. An in-person site visit by a member of our experienced team
  2. A detailed follow-up report covering:
  • The potential size and location of a Garden Suite on your property
  • Key issues such as emergency access, if will sprinklers be needed, etc.
  • Impact of any nearby trees on where and how you can build
  • Appropriate strategies for site servicing
  • A budget estimate of project costs
  • Next steps to get started!

3. A follow-up one-on-one Zoom consultation with one of our Senior Architects to discuss any questions you might have.

Have questions?

Not sure if this is the right move? No worries. Book a 15 minute chat here with Architect Daniel Hall to discuss your concerns. It’s just $50 and comes with a full money-back guarantee if you feel it was a waste of your time.

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