Sale Update and Building Costs

Last week Aaron made his inaugural contribution as an actual blogger (rather than a commenter) with a post about a South Slope property. We got some good discussion, both about who would buy it and why, and whether the post was an ad in disguise.

I commented that one of the saving graces of the post was that interested observers would be able to watch what happened with a real property in almost real time. To keep that true we require an update.

The property sold, after some negotiation back and forth, for full price. There was a great deal of interest in it, but price was a bit of an obstacle. Most enquiries were sign calls, and after price came up the calls generally ended promptly.

Jim made some interesting comments, in regard to investor return as well as price, building costs and builder profit. Doing his builder numbers this doesn’t work. However, if a builder bought this property, what does that say about Jim’s math, or more to the point, how are builders able to do their business? Are reported costs wrong? Or is it that there is a great range of costs, and the difference may ot always be apparent to the casual observer?

Are costs $200/sq. ft.?

Or are they $80?

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11 Comments

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11 responses to “Sale Update and Building Costs

  1. Jaymo

    Homebuilders are no more prescient to future market conditions than anyone else. (DR Horton’s earnings were down 85% in the last quarter) If they were they would have been able to predict what was going to happen in some of the US markets, which they clearly were not. They went about their business blissfully overbuilding and that oversupply is at least somewhat responsible for what we see happening right now.

    That there exists one builder that says go and another that says stop is by no means any indication of whether that house is a sound investment.

  2. Jim

    Jaymo/Rob:
    Good points. I built a few houses in the late ’90’s and have done some commercial and residential renos lately.. You make project numbers work, because in HOT markets, buyers see granite and stainless($5,000?). They miss things like radiant v. forced air, window quality, r-factors. above v. below grade sqaure footage, ceiling heights, concrete upper floors etc.. Building to code and fully inspected by no means equals quality. So you could probably build and sell anything right now. Also, as a builder, you have to build. Sometimes you get squeezed to low or negative margins, but the alternative is to sit it out ,and that feels like slow death. Half the builders today wil probably take a huge hit when the market turns, but you can’t accurately predict when that will happen, so you keep doing projects on the hopes that curent profits balance one or two loses at the market top.

  3. Gary Lau

    It all depends on the materials and the workmanship. I’ve seen homes built on the cheap that is just crap, yet people still buy it. I’ve heard the builder’s special homes are coming in around $110 / sq-ft. But I wouldn’t live in one of those myself.

  4. Deedub

    We are looking at putting a house on raw land and our cost estimate is coming in at $200/sq. ft. That is for quality construction and high quality but not “premium” fixtures etc.

    The last time I looked at doing this was in the late ’90s, and the prices then were around $75/sq.ft. But that was USD$ – with the exchange rate differential between then and now I estimate a 100% increase in building costs over the past 10 years.

  5. I spoke to my “neighbour” the other day and he intimated that his building cost was around $125/sq. ft. Middling to worse construction imho.

    He’s flogging the place now – before it is finished, and I went through a break down of costs – list, etc. with him, and discerned that he will be lucky if he breaks even. He says that there is fighting at home, and he’s sweating it, but I don’t know what to believe from him. My gut tells me, not much.

    He is a realtor by the way, and is kinda shifty. (Rob is a realtor too, but I trust him.)

    It is probably reasonable to assume that quality construction could be a premium $200/sq. ft.

    Rob – what were your construction costs? I know you had less labour costs, but guess-timate the hours, and multiply by $65.

  6. jesse

    For standard 2500 sqft Van special this spring I think $110-120 per square foot is about right. Adding some standard custom features and this can easily go up by $30/sqft. For a quality place I don’t know but >$200 sounds reasonable.

  7. Jack Mepoleoff

    Cost of construction is insignificant in Vancouver.

    What does it really matter when you consider the fact that you are building on a piece of land that is the closest to Paradise as you can possibly get on Earth?

    Plus the Olympics are coming.

  8. Moneyfromasia

    “closest to paradise on earth”
    “Priced out forever” yayya we went over this stuff before…anybody see Olsen on your side on CTV tonight..it was on RE?

    btw Jack, you’ll have to pleasure yourself. We don’t feed barking spiders!!!

  9. robchipman

    mfa:

    Don’t take Jack too seriously. He’s the same guy who always changes his name and makes the same humorous comments. Say the name slowly and you’ll get it. Some would call him juvenile, but I’ll stick with dependable.

  10. Moneyfromasia

    I had that figured out thats why I commented about not feeding his barking spider! It’s all good!

  11. Building

    Whoops, meant to put this under here instead of the original post.
    “We are building on the west side right now with mid-high finishings and it’s coming in at slightly over $200/sq.ft. (Including demo, etc.)”

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