Apartment construction costs jump €25,000

Hard costs of building a two-bed, medium-rise suburban apartment is now over €240,000, report found

The company said it expected general construction inflation to fall back to between 5% and 7% this year followings its rollercoaster 2022 that saw prices of key materials jump by 12%. Picture: Eddie O'Hare

The construction costs of an average two-bed apartment increased by 9.6%, or between €21,000 to €25,000 last year according to a new report. 

Consultants Mitchell McDermott found the hard costs of building a two-bed, medium-rise suburban apartment is now over €240,000.

The main contributors to the increase are mechanical and electrical services, up 18%, concrete, up 27%, brickwork, up 39% and reinforcement steel, up 17%. 

The €240,000 figure excludes indirect costs, parking, siteworks, margin and Vat. If those are included, the total cost of delivering the apartment is in the region of €460,000; the sales price would have to equal or exceed this.

The company said it expected general construction inflation to fall back to between 5% and 7% this year followings its rollercoaster 2022 that saw prices of key materials jump by 12%.

Paul Mitchell, one of the authors of the report, said while 2022 was a year of two halves, there are some signs we may be coming to the end of the current inflationary cycle.

“Construction inflation was on the rise in the early months of 2022 but really began to take off following Russia’s invasion of Ukraine, mainly due to the dramatic rise in materials such as steel and other energy-intensive materials such as aluminium and brick. Material prices began to moderate in Q3 and encouragingly plateaued in Q4."

"For apartment cost inflation, the figure for H1 was 6.8%, while in H2 it was 2.8%. So, we are trending in the right direction," he said.

A section of the report focused on tracking the number of SHDs which received planning permission between 2018 and 2022 but have not yet commenced. It found of the 103,057 SHD units which received planning during this period, 28,755, or 28%, have not yet commenced.

Mr Mitchell said while some commentary had suggested these units were not being commenced due to land hoarding, their findings suggested a different narrative.

“Our analysis found the issue surrounding non-commencements is not clear-cut but viability features front and centre. Thirty-three per cent of these developments related to regional apartments which are simply not viable. 

"Another 17% haven’t proceeded due to viability challenges. In 17% of cases, the site was sold, while in a further 10% of cases permission had only recently been granted.

“Affordable finance rates and a guaranteed buyer or buyers are a pre-requisite to any developer starting an apartment development. If these elements are not in place, supply will not be forthcoming.”