What Rising Construction Costs Mean for Real Estate Investors in 2025

The cost of building and renovating real estate in Canada has continued to rise into 2025. For investors, this trend presents both challenges and strategic opportunities. Whether you're flipping homes, executing a BRRRR (Buy, Rehab, Rent, Refinance, Repeat) strategy, or developing a new build, understanding how rising construction costs impact your bottom line is essential.

Let’s break down what’s driving these increases, how they affect various types of investments, and what you can do to stay profitable despite the squeeze.

Why Are Construction Costs Rising in 2025?

Several key factors are contributing to higher costs:

• Material Prices: Lumber, drywall, concrete, and other essentials remain elevated due to supply chain delays and global demand.

• Labour Shortages: The skilled trades shortage in Ontario continues, pushing wages up across all trades—electricians, framers, plumbers, and more.

• Interest Rates: Higher borrowing costs make financing construction more expensive, from bridge loans to construction financing.

• Increased Regulation: New green building codes and stricter municipal permitting requirements add time and cost to many projects.

  
  

How It Affects Real Estate Investors

1. Flippers Face Tighter Margins

   Flipping properties requires fast, cost-efficient renovations. With higher input costs, it’s harder to realize strong profits unless you buy well below market value. You’ll need to budget conservatively and add a wider profit cushion to deals.

2. BRRRR Investors Must Reassess Rehab BudgetsRehab costs often increase mid-project, especially when dealing with older buildings. If you're relying on a refinance to pull capital out, make sure your renovation budget is realistic and includes a 10–15% contingency.

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4. Buy-and-Hold Investors See DelaysEven cosmetic renovations for rentals can take longer and cost more, delaying when a property is cash flow positive. Investors should plan for longer holding periods before reaching full income potential.

5. New Builds Require Sharp PlanningFor those developing multiplexes or custom homes, fixed-price contracts with reliable builders are more important than ever. Without them, overages can spiral.

   
   

   

   
   

Tips to Navigate Higher Costs in 2025

• Get Quotes Early & Often: Prices change quickly. Don’t rely on last year’s numbers.

• Lock in Material Costs When Possible: Work with suppliers that offer price guarantees.

• Build Strong Contractor Relationships: Trusted trades may offer loyalty pricing or priority scheduling.

• Focus on Cosmetic Upgrades: In rentals, things like paint, lighting, and flooring often deliver strong ROI without structural changes.

• Increase Rents Strategically: If you've added value, consider raising rent to maintain ROI.

• Explore Smaller Markets: Labour and material costs may be lower outside major urban centres.

  
  

Final Thoughts

Construction costs in 2025 are forcing investors to be more strategic, detail-oriented, and cautious. But for those who adapt, the opportunities are still strong. Rising rents and housing demand continue to support well-executed value-add deals.

At Greenell Capital, we work with investors to assess project feasibility, navigate rising costs, and build portfolios that perform—even when the market gets expensive.