Homebuyers must overcome a series of hurdles in the Canadian real estate market in order to purchase a home. In addition to soaring average selling prices nationwide, homebuyers will also endure limited supply, fierce competition and rising interest rates. But there is another challenge that homebuyers will inevitably face as they comb through the housing market: condo insurance.

As homebuyers face rising costs, from higher mortgage payments to intensifying utility bills amid skyrocketing energy prices, higher condo insurance rates will add to the struggle in this inflationary environment.

Condo Insurance Soaring in Parts of Canada

Soaring condo insurance rates have become an issue in the Canadian housing market, with many jurisdictions recording significant increases. Data from the financial products comparisons website LowestRates.ca last year highlighted that condo rates had risen exponentially in Canada.

In British Columbia, condo rates have surged 22 per cent. In Alberta, condo premiums have advanced nine per cent, while in Ontario condo insurance has increased about eight per cent.

At the same time, the study found a gap between home insurance and condo insurance, with the former either holding steady or falling compared to condo units.

So, what is driving the cost of condo insurance rates anyway? The report stated that it has to do with inflation in the building materials sector.

While there isn’t enough data to confirm specific effects the pandemic has had on home insurance prices in Canada, we spoke to insurance experts who believe that the recent increase in the cost of building materials is driving up condo insurance premiums across the country,” according to the report. “Experts believe that the combined impacts of more expensive building materials amid a higher volume of expensive claims from extreme weather events help explain the increases.”

Moreover, industry observers note that there has been a growing number of claims amid an increase in do-it-yourself (DIY) home renovation projects since the beginning of the coronavirus pandemic.

The other factor that market experts assert is a contributing problem to rising condo insurance is the frequency of severe weather. It is estimated that claims costs from severe weather exceeded $2 billion last year.

For example, a hailstorm in Calgary, Alberta, led to approximately $500 million in insurance cost claims. A tornado in Barrie, Ontario, triggered $75 million in claims.

In 2019, we started to see more severe weather and claims cost increasing from what we call slip and fall events. Investment income was declining, and these global events were happening, such as wildfires, earthquakes and floods,” Rob de Pruis, the director of consumer and industry relations at the Insurance Bureau of Canada (IBC), noted in the report.

But some groups are calling for reforms to the condo insurance sector, including in the province of Quebec.

Earlier this year, the Association Québécoise des Gestionnaires de Copropriétés (AQGC) urged the provincial government to alter co-ownership rules in the condo industry, as well as institute mandatory inspection rules on Quebec construction sites.

The dysfunction of the insurance sector is too much to take and a major financial irritant that must be resolved quickly,” the organization said in a news release.

Begging for Relief in a Hot Housing Market

Is relief on the way?

Housing and insurance experts argue that condo insurance premiums should come down as building material costs fall too. The issue, however, is that raw material prices are not sliding at a substantial pace.

According to Statistics Canada, the annual producer price index (PPI) advanced by 16.4 per cent in March. The statistics agency also reported that raw material prices surged 29.8 per cent year-over-year in February.

Lumber prices are trading at around $900 per thousand board feet, buoyed by the global supply chain crisis and output failing to keep up with demand. Moreover, the flooding at the end of 2021 in British Columbia has impacted the transportation network. However, prices have eased in recent weeks because of cooling new home sales in the United States, allowing production and inventories to play a game of catch up.

The current economic landscape has not deterred experts from modifying their projections that condo insurance rates will ease toward the end of 2022.

LowestRates co-founder Justin Thouin told Global News: “It looks as if prices are either flattening out or even declining for insurance, which we hope means that there’s an equilibrium there whereby insurance companies now feel that they’re charging enough to cover their risk of claims moving forward.”

Until then, study authors suggest that consumers monitor the marketplace, engage in price comparisons, and search for the lowest rates possible. This could be the only way to survive elevated insurance premiums in this sky-high inflationary environment.