Residential Renovation Price Index (RRPI)

Detailed information for second quarter 2024

The Residential Renovation Price Index (RRPI) is a quarterly series that measures the change over time in the prices that contractors charge to complete renovation projects for residential buildings.

Data release - October 25, 2024

• Description
• Data sources and methodology
• Data accuracy

Description

The Residential Renovation Price Index (RRPI) measures the quarterly change over time in the prices that renovation contractors charge to provide renovation services for a range of residential renovation projects. The RRPI is composed of 8 separate project groups, containing a total of 37 individual projects. The prices include the value of all materials, labour, equipment, overhead and profit required to construct each project. They exclude value added taxes and any costs for project design. The RRPI may be used by government agencies undertaking economic analyses and other users that are interested in evaluating the impact of price changes on household capital expenditures. Statistics Canada, for example, may use the RRPI to deflate estimates of the renovation industry's contribution to national expenditure, output and capital stock. Other uses include making adjustments to project costs for escalation; as well as forecasting financial requirements for proposed projects and real rates of return on investment.

Reference period: The time period for which the RRCPI equals 100; currently this is the year 2023.

Collection period: Collection occurs over the second and third months of each quarter, i.e. February and March, May and June, August and September, November and December.

Subjects

• Construction
• Construction price indexes
• Prices and price indexes

Data sources and methodology

Target population

The target population for the RRPI encompasses all work-put-in-place cost components for residential renovation projects in Canada. Construction prices compiled under Statistics Canada's Building Construction Price Index (BCPI) are coupled with administrative data to determine the relevant price movements for residential renovation cost components each quarter. Weights from the Survey of Household Spending (SHS) are then used to derive the relative importance of each renovation project in the RRPI.

The cost components collected cover construction activities associated with the architectural, structural, mechanical and electrical trade groups, as well as contractors' overhead and profit. Each renovation project price index is based on a representative residential renovation project. As a result, the observed population of work-put-in-place cost components is limited to those that would be included in the respective residential renovation project selected. Where possible, each project's price is chosen from an actual completed residential renovation project for which the construction costs and selling price are known. Alternatively, a representative residential renovation project is identified, and its completion cost is estimated by cost consultants. The project chosen must represent the median for its class with respect to price, size, design and construction techniques employed. In addition, the project must be for a residential renovation project that might be constructed in any of the census metropolitan areas (CMAs) covered by the index. Since the project must be typical for renovation projects undertaken across the country, those with unusual shapes, sizes or materials are avoided. New representative residential renovation projects are reviewed every 10 to 15 years.

For the RRPI, the observed population is limited to residential renovation projects in 15 CMAs: St. John's, Moncton, Halifax, Québec, Montréal, Ottawa-Gatineau (Ontario part), Toronto, London, Winnipeg, Regina, Saskatoon, Calgary, Edmonton, Vancouver and Victoria. Based on the value of issued building permits, these CMAs were assessed to have enough ongoing residential renovation building activity to support collection of quarterly pricing information over time. They also cover most provinces.

Instrument design

Price information for this survey is collected using an electronic questionnaire (Construction Contractors Survey). The electronic questionnaire was designed, tested and refined in consultation with the Questionnaire Design Resource Centre and with residential and non-residential general contractors operating in the Vancouver, Toronto, Ottawa-Gatineau and Montréal CMAs.

This electronic questionnaire collects information on changes in the costs for work-put-in-place components (construction activities) included in residential and non-residential building projects, the reasons for changes, and construction market conditions. With reference to a project built or bid on in the previous quarter, respondents are asked to report how much the estimated costs for each component would have changed if they repeated the build or bid in the current quarter. The details of the project are not reported, and the respondent can choose different projects each quarter so long as they are representative of the work they typically do. The RRPI focuses solely on the pricing information collected from the residential portion of the Construction Contractors Survey.

Sampling

This is a sample survey with a longitudinal design.

The RRPI has a multistage sample design. A combination of cut-off and judgment-based sampling is used to select representative work-put-in-place cost components from residential renovation projects, as well as the general contractors that will be contacted for price information.

Sampling Unit
There are unique sampling units associated with each stage in the RRPI sample selection. These include work-put-in-place cost components and contractors. Administrative data are also used to supplement various component costs.

Stratification method
Before sample selection, the frame of contractors is stratified by CMA. The work-put-in-place cost components in the representative residential renovation projects are divided into eight main project types: exterior additions or improvements, flooring, heating and air conditioning equipment, interior additions or remodels, plumbing fixtures and equipment, property improvements, roofing, and windows and doors.

Sampling and sub-sampling
There may be a large number of work-put-in-place cost components in a given renovation project, so for practical reasons, a sample is selected from each trade group, as well as from the contractor's overhead and profit category. The sample is selected based on construction cost consultant and subject-matter expert estimates. In addition to their importance in the total project cost, components have a higher likelihood of selection if they meet the following criteria: they are standard to all residential renovation projects across geography and across time, they are included in some of the projects used to compile other building indexes, or they account for the largest volumes of material inputs.

To collect information on changes in the cost components, a judgment sample of well-established general contractors is selected for each CMA. In general, these contractors are selected from among those reporting building permits for residential renovation projects to Statistics Canada's Building Permits Survey. They are usually members of local construction associations who are knowledgeable and capable in their pricing. The contractors must be actively bidding and winning a share of the residential renovation jobs. Their reported price movements are considered to be representative of market conditions in their CMA. Over time, builders enter and exit the residential construction market. To ensure that the RRPI continues to measure the change in contractors' selling prices for residential construction projects, the sample of contractors is monitored and refreshed. For this reason, Statistics Canada subject-matter staff continuously review the Construction Contractors Survey contractor sample to determine when sampled units need to be added or removed.

Data sources

Responding to this survey is mandatory.

Data are collected directly from survey respondents and derived from other Statistics Canada surveys.

Price changes for sampled work-put-in-place components and market information are collected quarterly from survey respondents, using an electronic questionnaire (Construction Contractors Survey). Administrative data sources are used to collect prices for selected products that are outside the scope of the Construction Contractors Survey. Prices for certain materials, labour rates and rental of equipment are obtained from a variety of secondary sources. Price information is collected for the 15th day of the middle month of each quarter or the nearest business day before the 15th.

Initial data collection from new respondents is completed by Producer Prices staff. This collection takes the form of telephone interviews, with data captured using the electronic questionnaire. During this collection, interviewers confirm that respondents are in scope, verify their contact information, confirm they perform residential construction and confirm the CMA for which they will be reporting.

Electronic data collection for subsequent reference quarters is handled by Statistics Canada's Halifax regional office. Respondents are emailed a secure access code and asked to complete the electronic questionnaire. Non-response follow-up is handled by email and telephone. Failed edit follow-up is done by telephone.

Error detection

Error detection is an integral part of both collection and data processing activities. During collection, edits are applied to data records to identify missing data, as well as capture and reporting errors. Respondents are asked to validate their data when these collection edits fail.

During data processing, subject-matter specialists review the collected data to identify and resolve errors, inconsistencies and outliers. In addition, they confront the price information with other available data sources to identify and resolve invalid and inconsistent data.

Imputation

Imputation is generally used in cases of missing data. A price may be missing because of late reporting or a shortage of component availability. Most often, the last declared price is used or an estimate is made based on the price trend observed for the same component in other provinces.

Estimation

The RRPI is calculated based on bid prices in the real market for sampled work-put-in-place cost components with a fixed specification and quantity. The prices consist of "competitive" prices that would have a reasonable chance of being the low price in an actual bid and therefore are not typical "list" prices. They reflect material, labour and equipment costs, as well as contractors' overhead and profit. They exclude value-added taxes and any project design costs.

The current price for each sampled cost component is estimated by adjusting the previous quarter's price for quarterly changes in the per-unit value of its material, labour rate and, less frequently, overhead and profit components. Information on price changes is collected from respondents or derived from administrative data or other Statistics Canada survey sources for this purpose.

The RRPI encompasses both elemental and aggregate indexes. The elemental indexes are calculated using a fixed weighted Laspeyres formula to combine prices for work-put-in-place cost components within each project type and CMA. The aggregate indexes are calculated using the Chain-Laspeyres formula to combine weighted CMA indexes to the 15-CMA aggregate.

Weights

Weights are assigned to each sampled work-put-in-place cost component, which are derived from the detailed costs originally provided by cost consultants for the year when the renovation project cost components were chosen.

Aggregating to the project group level, each project group price movement is calculated by taking the unweighted geometric mean of all project price movements within the group. Aggregate residential renovation project type weights are updated biennially, and are derived from renovation spending data detailed on the Survey of Household Spending.

The CMA-level weights are updated biennially using building permit renovation values for each of the 15 CMAs measured. The CMA-level weights are updated biennially and are introduced for the first quarter of the respective reference year, when the second-quarter indexes are released.

Linking of indexes

With the introduction of a new basket, historical estimates are linked to the new basket by maintaining the same historical period-to-period changes. This is done by calculating a link factor for each index series as the ratio of the new index series in the overlap period to the old index series. This link factor is then applied to the old index series to bring it up or down to the level of the new index series. The historical continuity of the RRPI is maintained wherever possible by linking the new price indexes with comparable historical indexes where they exist.

Quality evaluation

Prior to publication, the RRPI is analyzed for comparability with historical trends, as well as for coherence with results from related economic indicators, known current events and information from other external price index sources.

Disclosure control

Statistics Canada is prohibited by law from releasing any information it collects that could identify any person, business or organization, unless consent has been given by the respondent or as permitted by the Statistics Act. Various confidentiality rules are applied to all data that are released or published to prevent the publication or disclosure of any information deemed confidential. If necessary, data are suppressed to prevent direct or residual disclosure of identifiable data.

Collected data are converted to price indexes and data are released as such, so that it is not possible to identify the suppliers of raw prices.

Revisions and seasonal adjustment

The RRPI series are subject to a one-quarter revision period after publication of a given quarter's data. The indexes are not seasonally adjusted.

Data accuracy

The statistical accuracy of these indexes depends on the quality of the price and weight information used in their compilation. All of these data sources are subject to their own errors. Data on prices and price changes are obtained from a sample survey, other Statistics Canada series and administrative sources. The weights used to compile the indexes for each CMA are obtained from a detailed breakdown of the work-put-in-place cost components of a representative residential renovation project at a point in time. The quality of this weight data depends on their timeliness, where, in general, the longer a project is used, the less it reflects the current mix of construction inputs and technologies. The weights assigned to the CMAs are based on the building permit data gathered by the Investment, Science and Technology Division of Statistics Canada.

Indexes for all levels of aggregation are considered to be statistically reliable.