Housebuilder Cairn Homes reports rise in building costs of €20,000 per home

Cairn Homes say they are trying to shave costs but that inflation added €35,000 in building costs per home in the last two years

Cairn Homes CEO Michael Stanley warned that despite most of the costs they were trying to curb — such as the price of materials and labour — were 'sticky'.  

Housebuilder Cairn Homes has said inflation added €20,000 to the average cost of building one of its new homes in 2022, and expects more increases but at a more modest rate this year.

Cairn Homes chief executive Michael Stanley said the company will have to find ways to reduce building costs, but added that the vast majority of cost increases were “sticky costs” including the cost of material and labour which he said will remain high.

Unveiling full-year earnings for 2022, the company said the average cost excluding Vat for one of its new starter homes was €366,000, up from €350,000 in 2021.

It said it sold a record 1,526 new homes last year, which generated €617m in revenue, with the majority of sales coming in the second-half of the year.

In 2021, it sold 1,120 new homes generating €424m in revenue.

This year, Cairn Homes plans to deliver up to 1,800 new homes, including 800 social and affordable homes, which will generate an expected €650m in revenue. It said that its sites already have full planning permission.

The company said that, in the last two years, inflation added €35,000 in building costs per home with the company hoping to limit cost inflation this year to €10,000.

Mr Stanley said that it’s “quite possible” that the rest of the industry are experiencing higher cost inflation than they are right now.

In 2022, the company spent €469m on labour and materials which they are expecting to increase to €500m this year.

The company said that their expected growth in sales this year will help them, their subcontractors, as well as their supply chain partners to manage the expected building cost inflation.

Mr Stanley said they are not seeing “significant evidence” of increasing prices in the new homes market which he said “seems to have stabilised somewhat”.

The company said with the cost of living and rising interest rates impacting affordability, it expects home pricing levels to be “relatively flat” this year.

Mr Stanley added that there is a “damaging undersupply” of apartments adjacent to areas of high employment pointing to Eurostat figures that show only 10% of Irish people live in apartments — the lowest in Europe.

Cairn Homes said it has 1,900 new apartments under construction across 11 new developments.

In 2022, Cairn Homes reported that their operating profit rose to €103m up from €58.4m in 2021.

Profit after tax stood at €81m, up 87% on the €43.2m generated in 2021.

As of March 1, the company has 1,503 new homes in its closed or forward sales pipeline which would generate net sales of €534m.

The company said it also plans on a €40m share buyback programme. The board of the company is proposing a final dividend of 3.1c per share adding up to a total of 6.1c per ordinary share.