New taste for big renos is driving industry, bumping inflation
Toronto home owners are paying more for repairs - and helping drive up inflation - in large part because many skilled workers are being drawn into Alberta’s red-hot housing market, making an already fierce trades shortage even worse.
An 8 per cent rise in the cost of home repairs across Canada helped nudge inflation up slightly last month, Statistics Canada reported Tuesday.
The annual inflation rate rose to 1.4 per cent in November from 0.9 per cent the month before. It was pushed up by higher mortgage and house repairs, but kept in check by the lower cost of new cars, gas and heating oil. In Toronto, the rate rose to 1 per cent from 0.7 per cent, while the provincial rate rose to 1.1 per cent from 0.6 per cent.
Statistics Canada said the rise in home repairs is the driving force behind the inflation hike; the first time in three months that the annual inflation rate has climbed over 1 per cent.
Analysts were quick to point to the flight of skilled trade workers to the boomtowns of Calgary and Edmonton - where home repair costs have jumped 45 per cent in one year.
“Alberta has seen an absolute explosion in housing which is drawing skilled workers from around the country and making the labour shortage in the trades even worse and driving up costs,” said Doug Porter, deputy chief economist of BMO Capital Markets.
In Toronto, contractor Jeff Mowder says a shortage of skilled workers has sent home repair costs “skyrocketing in the past couple of years.
“When I’m looking for people in the specialty trades - tin ceilings, trim work, cabinet work - there’s a real lack of skilled workers, and the rising costs do get passed on to the customer,” said Mowder, president of Mowder Construction.
Add this to Toronto’s own competing renovation boom, especially in high-end neighbourhoods, and the demand for skilled workers is higher than ever, said Michael Tafts, owner of G. Pederson and Associates Construction.
“We’re stretched thin on trades with the amount of business we’re seeing in neighbourhoods like Rosedale and Lawrence Park - partly because of the renovation boom but also partly because consumer taste for renovation has gone up. Everyone wants the bells and whistles and they’re biting off more than they would have a few years ago,” said Tafts.
Even north of Toronto, contractor Scott Wootton has had to raise his pay for entry-level carpenters twice this year after losing five of them “in a mass exodus to a competitor who was paying more.
“In 20 years I’ve never had this kind of attrition — ever. But the bar is being raised for entry-level workers because there’s such a shortage,” said Wootton, president of Kawartha Lakes Construction Co. and chair of the Ontario Home Builders’ Association’s Renovation Council.
“There’s also the rising price of metals like copper and steel - which affect your plumbing and electrical trades - and sheet goods have gone up as much as 12 per cent.”
Yet customers often don’t realize the effect this has on their overall bill, notes Mowder.
“You don’t want to be a general contractor out there today - the costs of material have skyrocketed in the last couple of years, but homeowners are still back in the 1980s with what they expect to pay, and even I get surprised some times.
“They’re still looking for drywall to be installed for $2 or $2.50 per square foot when it’s actually about $3.50. We’re all a little ‘old school’ when it comes to the new prices.”
The Consumer Prince Index also reflected the fact that restaurant meals cost more last month, as did electricity. But auto purchases and the prices of gasoline, heating oil, natural gas and computers all went down.
Gasoline prices fell only 3.1 per cent between November 2005 and last month after dropping more than 14 per cent during the previous two months.
The core inflation rate, which is used by the Bank of Canada to gauge underlying inflation pressure in the economy, was at 2.2 per cent last month.
This core rate discounts volatile items such as energy and food and ignores changes in indirect taxes such as July’s GST cut. In setting interest rates, the bank aims to keep the core inflation rate at two per cent.