Building a home in Canada is becoming increasingly expensive. In fact, government figures show that the cost of building the average house in Canada has increased 58% since 2020. The government expects the cost to continue rising due to tariffs.
With that in mind, you may be wondering how much it costs to build a house. The average cost ranges between $140 and $320 per square foot. However, the true answer depends on where you build and whether you opt for a stock home plan or design and build a fully custom dream home.
Key Takeaways
- The type and size of the house being built directly influence the overall construction costs, with larger and more complex designs being more expensive
- Some financial institutions offer new construction loans or construction mortgages that are similar to traditional mortgages, but usually involve a higher interest rate
- Considering your lifestyle needs can help you determine where to invest extra money and where to save
What is the Average Cost to Build a Home?
There are many factors that go into determining how much it costs to build a home, including location, size, and the materials used. That being said, according to Altus Group, the average cost per square foot ranges from $140 to $320 for a single-family residential home with an unfinished basement. However, the price for a custom-built home could increase to over $1,250 per square foot.
To get a better idea of how much a newly built home could cost in major cities across the country, we’ve calculated a price range for a 2,000-square-foot single-family home in Canada. These cost estimates are intended as rough estimates.
¹Estimated price ranges are for a wood-framed single-family home with an unfinished basement and do not include the cost of buying land
²Estimated price ranges are for a wood-framed custom-built single-family home and do not include the cost of buying land
In major Canadian cities, high demand for housing significantly impacts construction costs. In urban areas like Toronto, the cost to build a detached house can climb to $200 to $275 per square foot or more. Custom-built homes can easily cost double or triple the price per square foot compared to cookie-cutter production homes, and prices for custom luxury homes can exceed $1,250 per square foot in high-cost areas like Vancouver. The average cost per square foot for a production home is lowest in Halifax, St. John’s, Montreal, and Ottawa, ranging from $140 to $225, and highest in Vancouver, at around $200 to $320.
Buying vs. Building a House
There are benefits and drawbacks to both buying and building a home. Choosing between purchasing an existing home and building on bare land means weighing the purchase price, customization options, and the process of creating your own home. It’s important to take the time to consider which option works best for you.
Building might be for you if you:
- Can wait up to a year or more to move in
- Want total control over the finishes and floor plan
- Have enough cash for a larger down payment
Buying might be for you if you:
- Want to move in soon
- Have a smaller down payment
- Don’t want to make all of the decisions that come with building a new home
How Much To Build a House
When estimating the cost of building a home, it’s essential to consider all factors, including land costs, site preparation, labour costs, and material prices. These building costs can vary significantly depending on the region, market conditions, and the project’s complexity.
Construction costs can be categorized into hard costs (materials and labour) and soft costs (permits, fees, etc.).
Location
The cost of land is one of the most significant factors in determining the overall cost of building a home. Vacant land in rural areas may cost less than $10,000, but it can be difficult to find in major cities, or it may cost hundreds of thousands of dollars.
Additionally, you may need to hire professionals to clear the land and level it before construction begins, which will add to the total cost of building a home.
Cost of Labour
You’ll need to work with many professionals when building a home, including general contractors, plumbers, electricians, roofers, architects and more. Labour costs can account for 30% to 60% of the total budget for building a house in Canada and are influenced by the availability of skilled trades and labour, which can vary significantly by region. General contractors’ fees typically range from 10% to 20% of the total construction cost and may require an upfront payment of up to 10%.
Cost of Materials
Material costs vary widely depending on current market conditions and the finishes you choose. For instance, a home with large windows, solid wood floors, and custom cabinetry will be more expensive than a home with standard windows, laminate flooring, and stock cabinets.
Level of Customization
A custom-built home is generally more expensive than a newly built home that comes with set plans from a builder. Unique features may require specialized professionals to design and install, which can add to the overall cost.
Fees and Permits
You will need to get a building permit before you can start construction on your home. The cost will vary by region. Additionally, you will need to pay for inspectors to ensure your home is built to code.
Financing Options for Building a New Home
Before building a home, you will need to figure out how you will pay for it. Options include a construction mortgage or a completion mortgage.
- Construction mortgage (progress draw mortgage) – Construction loans pay out funds in stages known as “draws”. Each draw is paid as a phase of the home construction is completed. Then, once the home is finished and you have an occupancy permit, the mortgage is converted to a conventional mortgage. A down payment of 25% to 30% may be required for a construction loan.
- Completion mortgage – A completion mortgage is given in one lump sum when the newly built home is completed. Essentially, the builder fronts the cost of building the home, and you purchase the home from them when it is ready for occupancy.
How to Save Money on Your New Build
We’ve established that building a new house can be expensive; however, there are multiple ways to make building a new home more affordable, including:
- Get multiple quotes – Obtain bids with detailed line-item breakdowns for accurate estimate comparison
- Choose a stock home plan – Choosing a pre-existing design over a completely custom design is far more affordable when it comes to new builds
- Build a smaller house – Reducing the square footage means lowering the number of raw materials and work required for construction, which translates to a lower cost
- Choose cheaper finishes – Standard finishes are more affordable, and you may be able to upgrade in the future
- Buy a smaller piece of land – The cost of land is a key factor in the overall expense of building a home
- Postpone non-essential features – Consider adding features, like built-in shelving, at a later date
- DIY what you can – You can save on overall costs by doing some of the work yourself, such as painting or installing light fixtures
- Plan for overages – Cost overruns and unexpected expenses are common when building a home. Set up a contingency fund of 10% to 15% of your total budget to help manage these costs
Bottom Line
Building a home can be an exciting journey, but you must consider the costs involved. Remember to get multiple contractor quotes and plan for overages when creating your budget.
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Cost to Build a House FAQ
Is it cheaper to buy or build a house?
In many markets, the upfront cost of buying a home is less than the cost of building a new one. However, it is essential to consider that older homes may require thousands of dollars in repairs within the first few years of ownership, thereby increasing the overall cost.
What is the best time of year to build a house?
The best time of year to break ground on a home in Canada is in the spring. Starting in the spring means there will be time to ensure your new home is weather-tight before winter arrives.
What size house is most affordable?
Generally, the smaller the home, the lower the cost of construction, as total square footage is a key factor in determining affordability. However, the complexity of the home design, the finishes you choose, and the price of the land will have major impacts on the cost to build a home. Opting for a no-frills home—a basic, functional construction with straightforward design and minimal luxury features—is often the most cost-effective option.
