The True Costs of New Construction
It’s no secret that new construction costs in BC can be significant. For many, however, this begs the question of what the true costs of new construction are here in British Columbia.
Today, I cover what these costs are and how, by understanding these costs, you can then make better decisions regarding your next (or first!) home purchase.
New Construction Cost Factor #1: GST
As of 2022, GST on new homes clocks in at 5%. This is subject to rebates.
This tax rate is calculated as 5% of the purchase price. This means that, when calculating the final price of a new home, it’s recommended that you factor in the listed purchase price with an additional 5% for GST.
When it comes to new builds, double-check if your contract of purchase and sale price includes full sales taxes. A good rule of thumb to use is that if taxes are included in these prices, then the 5% for GST has already been included.
In a residential real estate purchase of a new home, the buyer is the one who is responsible for paying this GST at the time of completion.
Factor #2: Builder Fee
As a real estate advisor (and someone who has both built and renovated homes!), I’ve learned a thing or two about builder costs. And one thing you must always factor in when building your new home is the builder fee, which can get confusing.
This fee is sometimes fixed with build—i.e. it’s a set price determined before construction starts.
But more common these days thanks to the costs being so high, it can be 10-15% as a Cost Plus fee. This fee gets added onto the total costs of the build, after all said and done.
On top of having an experienced builder at the helm, paying a builder’s fee also ensures that you’re benefiting from the industry relationships, know-how, and timeliness that comes with hiring a professional.
Factor #3: Carrying Costs
Also known as “holding costs”, carrying costs are the expenses that allow you to maintain your home, which you pay in addition to your monthly mortgage payments.
Common types of carrying costs include:
- Utilities (for example, hydro and water costs)
- Mortgage interest
- Property taxes
Extra charges like these are frequently not factored in when buyers are searching for a home. Be sure to bookmark this blog as a reminder!
Factor #4: Extra Expenses
Finally, thanks to budget overages, you should always consider a 10% buffer over and above the entire build (including the builder fee). In fact, lenders will usually require you to have extra cash on hand to account for this potential 10% budget overage.
Looking to Learn More About the True Costs of New Construction in BC?
I’ve been in your shoes: as both a real estate professional and a resident of BC who is in the process of building my next home. I work with clients to make the most of the sale of their home, as well as to ensure they’re always getting the best value on their purchase–or on their new construction. Need more info to inform your next home purchase? Reach out today.