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Why Are Canadian Construction Costs So High? (2018)

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Re: Why Are Canadian Construction Costs So High? (2018)

#11

Post by sysbin »

thbr99 wrote: post #9
markus_zhang wrote: post #3

If you want some fun, read the investigation reports about the corruption surrounding construction business and politicians in Montreal, QC. Not sure which year it was, could be 2015.

Montreal has a never ending construction. A colleague of mine says the mafia controls the construction business in Montreal. Seems like corruption is a tad high in Québec than Rest of Canada

This may be indeed true. Some say the construction is the fault of the city being old but I’ve seen the same street being worked on throughout the summer for two consecutive years. There is construction everywhere as well compared to other cities I’ve visited.

Re: Why Are Canadian Construction Costs So High? (2018)

#12

Post by eru »

sytelus wrote: post #5

This is the same case in US. The cost of construction has far outpaced inflation by order of a couple of magnitudes while technology keeps getting cheaper and labor prices are still stagnant for decades. Amazingly, it's exactly reverse case in China where construction prices have fell through the roof.

> [...] and labor prices are still stagnant for decades.

Labour's share of GDP has roughly stayed constant. GDP per capita has increased, both real and nominal.

Re: Why Are Canadian Construction Costs So High? (2018)

#13

Post by eru »

larnmar wrote: post #7

In any market, there’ll be a limited number of contractors capable of doing a really big job like building a railway line (or constructing an aircraft carrier, or a fighter jet, or whatever). These contractors have a game theoretic choice to make: either they work hard to compete on price, or they inflate their budgets and count on their competitors to do so too, safe in the knowledge that there’s enoigh projects goi…

Careful design of regulation can lower the barriers to entry, and thus make colluding harder.

You are right about the scale of the big players making it hard for upstarts to compete. One of the most straightforward ways to still get competition, is to make it possible (or even easy!) for foreign companies to bid.

Re: Why Are Canadian Construction Costs So High? (2018)

#14

Post by [deleted] »

eru wrote: post #12
sytelus wrote: post #5

This is the same case in US. The cost of construction has far outpaced inflation by order of a couple of magnitudes while technology keeps getting cheaper and labor prices are still stagnant for decades. Amazingly, it's exactly reverse case in China where construction prices have fell through the roof.

> [...] and labor prices are still stagnant for decades. Labour's share of GDP has roughly stayed constant. GDP per capita has increased, both real and nominal.

[deleted]

Re: Why Are Canadian Construction Costs So High? (2018)

#15

Post by frosted-flakes »

salvad0r wrote: post #8
sytelus wrote: post #5

This is the same case in US. The cost of construction has far outpaced inflation by order of a couple of magnitudes while technology keeps getting cheaper and labor prices are still stagnant for decades. Amazingly, it's exactly reverse case in China where construction prices have fell through the roof.

"fell through the roof"; I'm not sure whether that's high and went low or low and went high. From the context I'm assuming that means its gotten very cheap?

It means that construction prices used to be through the roof (very high). Now they've fallen back down through the roof to somewhere on the main floor, but not in the basement.

Re: Why Are Canadian Construction Costs So High? (2018)

#16

Post by Retric »

eru wrote: post #12
sytelus wrote: post #5

This is the same case in US. The cost of construction has far outpaced inflation by order of a couple of magnitudes while technology keeps getting cheaper and labor prices are still stagnant for decades. Amazingly, it's exactly reverse case in China where construction prices have fell through the roof.

> [...] and labor prices are still stagnant for decades. Labour's share of GDP has roughly stayed constant. GDP per capita has increased, both real and nominal.

It’s fallen significantly: https://www.bls.gov/opub/mlr/2017/article/estimating-the-us-...

However, in the late 20th century—after many decades of relative stability—the labor share began to decline in the United States and many other economically advanced nations, and in the early 21st century it fell to unprecedented lows.

PS: In terms of overall GDP a numbers (edit: not real data) 21% vs 17% may seem more or less stable but that’s a 20% drop or roughly all inflation adjusted per capita GDP growth over the last 20 years.

Re: Why Are Canadian Construction Costs So High? (2018)

#17

Post by moltar »

As I can see from living in Canada and travelling the world there can be several reasons:

- corruption, especially in QC

- over-the-top safety requirements, regardless of project size. E.g. in Toronto every road work sight has a police officer present who’s just standing there bored out of their mind. In Montreal it’d be two persons on each side holding a flag - a job in Europe replaced by a temporary semaphore.

- lack of experience and expertise. Canada is a relatively young country with very few major infra projects under its belt.

- lack of funding due to low density. You just can’t build ambitious infra projects for such sprawling city design. Every city, except Montreal to some degree, suffers from urban sprawl and low density.

- lack of care by citizens. Most Canadians aren’t well travelled outside of Americas. They don’t know what good cities look and feel like. Even when they go on vacations it’s generally cheaper destinations in southern parts like Cuba, Mexico and Dominicans.

Re: Why Are Canadian Construction Costs So High? (2018)

#19

Post by totony »

moltar wrote: post #17

As I can see from living in Canada and travelling the world there can be several reasons: - corruption, especially in QC - over-the-top safety requirements, regardless of project size. E.g. in Toronto every road work sight has a police officer present who’s just standing there bored out of their mind. In Montreal it’d be two persons on each side holding a flag - a job in Europe replaced by a temporary semaphore. - la…

Agreed with the corruption and over-legislation, which in my experience coincide. Bidding on governement projects in QC is very painful to do and corruption is sky high so competition cant set in

EDIT to add: example of QC bidding: most companies underbid the construction work to later postpone the deadline and request more money than originally bargained, and there doesnt seem to be any (enforced) legislation to consider that

Re: Why Are Canadian Construction Costs So High? (2018)

#20

Post by eru »

Retric wrote: post #16
eru wrote: post #12

Earlier quoted context omitted.

> [...] and labor prices are still stagnant for decades. Labour's share of GDP has roughly stayed constant. GDP per capita has increased, both real and nominal.

It’s fallen significantly: https://www.bls.gov/opub/mlr/2017/article/estimating-the-us-... However, in the late 20th century—after many decades of relative stability—the labor share began to decline in the United States and many other economically advanced nations, and in the early 21st century it fell to unprecedented lows. PS: In terms of overall GDP a numbers (edit: not real data) 21% vs 17% may seem more or less…

Where does the 21% vs 17% come from? The graphs in that article seem to hover around 56% to 66% for the labour share since 1947. What am I missing?

But looking at the graphs, there seems to have indeed been a big drop in the labour share since the dot com boom.

If I remember right, the capital share has been stable. But the share going to real estate has exploded.

And that's likely for the same underlying reasons construction costs have skyrocketed. See https://www.brookings.edu/bpea-articles/deciphering-the-fall... and https://ftalphaville.ft.com/2014/02/03/1759582/piketty-and-t...

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