New apartments and three bed homes in Cork must sell for over €200k to be viable

New three-bedroomed semi-detached homes in Cork will have to sell from €270,000 and apartments from €230,000, to be economically viable, a construction industry seminar was told yesterday.

However, revised Central Bank lending rules seek to peg prices for homes for first-time buyers closer to €220,000, a level at which new builds cannot be supplied, it was claimed. It was a move which has already affected the Dublin market and driven buyers to the fringes of counties such as Meath and Kildare for homes they can secure borrowing on.

Against a mounting backdrop of a housing and rental crisis, builders, developers, bankers, and estate agents were yesterday told by one of the country’s most senior surveyors, Frank Ryan of DTZ, it now takes €255 per square foot to create a starter home, and €300 per square foot, or €230,000, for an 800 sq ft apartment.

If builders were to build and sell for below these sort of sums, “the risk is you’ll be a busy fool”, warned Mr Ryan, addressing a Construction Industry Federation briefing on ‘the Viability of Residential Development in Cork’.

The housing market, including private and social rental segments, remains fragile at a time of need for more supply, and with a need for as many as 100,000 social homes alone, as public housing has not existed in any measure since 1990, added Mr Ryan. He warned of “very deep problems in the market”, describing it as “very fragile, with no joined-up thinking, and no one in charge”.

He noted a jump in the price of land in the greater Cork area in the latter months of 2015, mostly to out-of-town buyers, saying it had gone very quickly from 10% to 15% of the anticipated sales value of completed houses, and could go to 20%. If it did, it would add €12,500 to the cost of a new home for buyers, he warned.

Similarly impacting on buyers and builders is the cost of finance. Banks might lend for residential development at a 6% interest rate, but if a builder using alternative finance sources has rates rising to 12%, and that has a cost impact on a finished home of as much as €15,000, said DTZ director Mr Ryan, who has a masters degree in housing policy.

He said: “We actually have a housing crisis across all sectors: In public housing, we have a crisis in the rental sector, a crisis in the sales sector; for the very first time, and I’m 30 years in Cork, we’re getting calls from people like Apple and Tyco phoning a commercial office frustrated that they cannot find accommodation for staff. It’s actually going to impact on our ability to attract industry and that is a significant issue.”

Freeing up housing supply is more dependent on infrastructure provision than on zoning, said Mr Ryan, a point Cork County Council manager Tim Lucey yesterday agreed with. “We’re singing off the same hymn sheet,” said Mr Lucey, who noted now that the council was not in control of development, with Irish Water, the NRA, and NTA also needed.

“We’re only a cog in the wheel, same as the CIF, and we’re finding that a challenge, there’s no one agency with responsibility for housing delivery.”

No representatives of Irish Water, the NRA, or NTA were in attendance yesterday, it was stated.