Society of Chartered Surveyors Ireland publish “The Real Costs of New Apartment Delivery” Report24 October 2017
- The cost of delivering a low rise apartment in suburban Dublin is €293K
- Delivery cost of medium rise apartments in the city ranges from €470K to €578K
- Report finds delivery of affordable medium rise apartments in Dublin is not commercially viable
- Affordability analysis found viable apartments require joint income of €87,000
- Construction costs make up 43% of total cost, while soft costs - such as VAT, margins, levies and fees make up - 41% of total costs
- Site purchase costs make up remaining 16% - but site costs range from €33K to €125K per apartment
- Surveyors say addressing costs issue requires multi-faceted approach including increasing supply of serviced land, flexibility in design, and improved rates/access to financing
Tuesday 24th October 2017. A major new report has found that the cost of delivering a two-bedroom, low-rise apartment in the Greater Dublin Area is €293K ex VAT. The report by the Society of Chartered Surveyors Ireland found that the cost to deliver medium rise (5-8 storey) apartments in the city ranged from a low of €470K to €578K at the higher end.
‘The Real Costs of New Apartment Delivery’ report also found that the actual cost of building the apartment – known as hard costs – made up 43% or less than half of the overall costs.
‘Soft costs’ such as VAT, levies, margins and fees make up 41% of the costs, while site costs accounted for 16% of the total.
Fig 1 - The report shows it is currently not commercially viable to deliver affordable medium rise apartments in Dublin.
Paul Mitchell, Chair of the SCSI working group that authored the report, said the research showed that contrary to popular perception apartments are expensive to build.
“Some people might have thought that building large numbers of apartment schemes – as opposed to building houses - might provide a more cost and time efficient solution to our current supply crisis. However, our report shows that costs can vary from €293K for a low rise suburban apartment – which is the one most similar to the average 3 bed semi – to €578K for a medium rise apartment in the city. While prices can vary significantly depending on design one of the key variables was site costs. In our report site costs vary from €33K per apartment to €125K and this highlights the paucity of serviced land.”
“Another popular perception is that the supply situation can be alleviated by building upwards. However, as we can see in this report the most expensive apartments are the medium rise ones in the city. Our research shows the higher you go the greater the costs. This is due to the fact that these buildings have a more complex structure and require a wider range of mechanical and electrical services, sophisticated facades, basement parking and much more.”
Affordability & Viability
According to the report the sales price of two-bed apartments in Dublin across all three categories currently range from €338K to €361K to €383K. Based on the Central Bank lending rules of a Loan to Value of 90% and Loan to Income cap of 3.5 times salary, a first-time buyer couple would require a deposit ranging from €34K to €50K and a combined salary range of €87K to €129K to afford these.
However, a couple on the average salary of €45K and combined salary of €90K with a deposit of €34K would only be able to meet the mortgage requirements for a low rise suburban apartment priced at €338K. (Category 1, see Example 1 in Note to Editor)
According to the most recent CSO figures, only the top 20% of households are earning over €80,000 per annum.
The report also found that the only apartment that is commercially viable to deliver at affordable levels is this low rise suburban type It says the viability gap for higher end, low rise suburban type apartments is €38K and that this widens to €137K for upper end medium rise apartments in the city.
The Director General of the SCSI Aine Myler said the purpose of the report was to provide independent information, to inform debate and suggest potential solutions to tackling the current housing crisis which exists in Dublin.
“According to the report only one category of apartment – low rise in the suburbs is commercially viable to build and affordable to first time buyers on the average wage. In Ireland, apartments comprise just 12% of our housing stock; the EU average is 50%. The clear message from this report is that we must drive down the costs of building apartments if they are to provide part of the solution to our housing crisis.”
“In the report, we outline the effect which cost reductions on all the key inputs would have on the bottom line and we hope these will be studied carefully by policy makers. While the Government has signalled its intention to introduce some new measures – and this is welcome – one of the key points highlighted in this report is the need for an increase in the availability of serviced land. The report shows that site costs account on average for 16% of total costs. The increase in costs between low rise suburban and medium rise city apartments is +179% and this is clearly not sustainable”
“Two other key areas which if addressed could lead to sizeable reductions are flexibility of design and finance costs. The obligation to have a car parking space for each apartment adds considerably to costs and is out of sync with modern urban lifestyles. Every 2% reduction in interest costs for builders leads to a reduction of €7K in the cost of an apartment. If the proposed Home Building Finance Ireland was able to offer finance to builders at 4% rather than the current 8%, €14K would immediately be wiped off the cost of an apartment. If the viability and affordability gaps are to be closed, these are the areas which need to be addressed as a matter of urgency,” Ms Myler concluded.
The latest SCSI report is a follow up to last year’s report ‘The Real Cost of New House Delivery’, which found that the average cost of building a 3-bed semi in Dublin was €330K.View All News