Prime Highlights:
Contractors are raising prices by up to 20% due to fears of impending tariffs on materials like steel and aluminum from Canada and Mexico.
President Trump’s 25% tariffs, set to expand on April 2, have led contractors to adjust bids in anticipation of higher costs.
Key Background:
Construction costs are rising by as much as 20% as contractors prepare for the impact of potential tariffs, warns Jon Paul Pérez, CEO of Related Group. The increase is primarily driven by the imposition of 25% tariffs on certain goods from Canada and Mexico, including steel and aluminum, announced by President Donald Trump. The tariffs are set to expand on April 2, prompting many contractors to raise prices in anticipation of higher material costs.
Pérez shared that contractors are padding their bids to offset the expected impact of these tariffs, particularly on materials sourced from other countries. In some cases, price hikes could reach up to 20%, depending on the materials used in each project. While these increases are still based on projected costs rather than current levels, they could significantly affect the prices of new homes and condos.
This anticipated rise in construction costs comes at a time when the housing market is already under pressure from high prices and elevated mortgage rates. A survey by the National Association of Home Builders suggests that rising material costs could add an additional $9,200 to the price of a typical home.
Despite these challenges, Related Group continues to see strength in the high-end real estate market, particularly in Florida. The company recently sold two penthouses for $150 million at a new development on Fisher Island, Miami, and is also building a luxury condo tower in Bal Harbour. However, Pérez noted that the middle-market segment, especially those buying condos priced between $1 million and $3 million, remains more cautious due to the uncertainties surrounding tariffs and immigration policies. Overall, the combination of tariffs, immigration policy changes, and rising construction costs is creating significant uncertainty in the real estate development sector.
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