Apartments are currently not viable to build and too expensive to buy for too many people, according to a new report published by the Society of Chartered Surveyors Ireland.
In the report, entitled ‘The Real Costs of New Apartment Delivery — analysis of affordability and viability’ published today, the SCSI looked at 28 apartment schemes in Dublin and found that only in the case of a suburban low-rise development did the current market price adequately meet the total delivery costs.
According to the report, for that scenario to change either the current price of an apartment must rise or the total delivery cost must fall.
The SCSI said poor information had “compounded the crisis” and sought to analyse the market conditions and costs around delivering two-bedroom apartments to the market in Dublin. Based on 28 apartment schemes involving 2,146 apartments, it categorised them into three types: suburban (low-rise); suburban (medium-rise); and urban (medium rise).
In the first category, it found that an apartment would cost €293,000 to build, with a sale price of €298,000. However, a suburban medium-rise apartment would cost €400,000 to build but would sell for around €318,000, while an urban medium-rise apartment would cost €470,000 but make €337,000 on the market.
“Only in the case of a suburban low-rise development does the current market price adequately meet the total delivery costs,” it said. “In all other scenarios, it is not currently commercially viable to build at these costs when compared to current market prices for similar apartments.”
Affording the apartments was also an issue. According to the report: “The least expensive type of apartment (suburban low-rise at the lower range) requires a (combined) gross salary of at least €87,000 per annum provided they have a 10% deposit. According to the most recent CSO figures, only the top 20% of households are earning over €80,000 per annum. These figures illustrate that there is limited capacity for price and moreover a need for nominal price stabilisation leading to real price reductions.” It said the focus needed to be on costs, typically divided between site purchase cost (16% of overall cost), the ‘bricks-and-mortar’ construction costs (43%), and ‘soft costs’ (41%).
While admitting that building apartments was too expensive, the report said “they can and should form a significant part of our affordable housing supply”. It said a number of options could be used to address the factors driving construction costs, such as increasing the supply of serviced land, innovation in apartment design, revising the design guidance and parking ratios, and establishing a state finance agency for funding housing projects. Other options could include a temporary cut or rebate on Vat for new affordable housing, and revising the department’s design guidelines to include build to rent.
Paul Mitchell, chair of the SCSI working group behind the report, said: “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.”
Director general of the SCSI, Áine Myler, said costs needed to be tackled, claiming one element — the obligation to have a car parking space for each apartment — was “out of sync with modern urban lifestyles”.
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