#cost-plus pricing

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Setting Your Price Point: A Business Strategy

Understanding the Art of Pricing Pricing your products or services effectively is a critical aspect of running a successful business. Your price point not only impacts your revenue but also shapes customer perception and can make or break your competitiveness in the market. In this article, we’ll delve into the art and science of setting the right price point for your business. Understanding Your…

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Cost-plus pricing

Today, Urbanation released its Q4-2018 market highlights report for the Greater Toronto Area. 

The general media will pick up these numbers and tell you that there’s been a precipitous decline in the number of new condominium sales. But the reality is that 20,028 units were sold in 2018, which is actually in-line with 10-year averages for this region. 2017 was a particularly frenetic, and unsustainable, year.

The average pre-construction sold price for a new condominium in the former City of Toronto (the core) was $1,117 psf last year, and $921 psf across the broader region. These numbers represent significant double digit increases from the year prior. But again, what I don’t think many people appreciate is that the cost environment has also changed dramatically over the last few years.

Construction costs are way up, as are development charges and a myriad of other pro forma line items. The above numbers are simply a result of cost-plus pricing. Here’s where costs are at and here’s where we need to be to make the project feasible. Margins haven’t increased; in fact, they’ve probably been squeezed for many developers.

I think this is an important topic that deserves more transparency and visibility. So I’m hoping to work with a developer friend of mine and publish something more substantial in the coming months.