A new report from the Society of Chartered Surveyors Ireland shows that a combined income of €127,000 per annum is now required to buy a home in the Greater Dublin Area – and that the cost of building a home in the area has increased by 39% in the past 7 years. The corresponding figure for income in the Northwest is €85,000
As a national average, hard costs which include materials and house building costs make up 53% of overall delivery costs, while soft costs – land, margin, levies, finance costs, VAT, etc – make up 47%, the report said.
Higher energy, fuel and building material prices are driving hard cost increases, the SCSI found, while soft cost increases are due to land costs, higher finance costs due to interest rate increases and uplift in professional fees
The report also found that the average cost of delivering a new 3-bed semi in Ireland ranges from €354,000 in the Northwest to €461K in the greater Dublin area (GDA) – an increase in costs in the GDA average by 24% or €90,000 since the last report over three years ago and by 39% since the first report in 2016.
Nationally, the average cost of delivering a 3-bed semi is €397,000 – while if Dublin is excluded the average delivery cost across the rest of Ireland is €386,000.
The SCSI’s ‘The Real Cost of New Housing Delivery 2023’ report is being launched at the SCSI’s national conference in Croke Park today.
Chartered Quantity Surveyor Micheál Mahon, one of the report’s authors, said the impact of Covid and the conflict in Ukraine have been the main contributors to the increase in ‘hard costs’ over the past two years.
“The main hard cost drivers have been energy, fuel, and shipping costs. The cost of various building materials, particularly concrete, insulation, electrical and plumbing products, steel reinforcement, and timber products, also increased dramatically.
“Nationally, ‘hard costs’ now comprise 53% of the total costs of overall delivery, while ‘soft costs’ make up the remaining 47%. However, in the GDA, this balance shifts to 49% ‘hard costs’ and 51% ‘soft costs’.
“While cost inflation has increased very significantly in recent years, recent SCSI surveys indicate prices are levelling off,” he said.
“’Soft costs’ range from approximately €156,000 in the Northwest region to just over €233,000 in the GDA. The primary soft cost drivers have been land costs, financing due to higher interest rates, levies and an uplift in the cost of professional fees. On a national basis, land and acquisition costs (per unit) equate to 13% of overall delivery costs on average,” he added.
The SCSI report also examined affordability from the perspective of a first-time buyer with an average combined salary of €95,000 taking out a mortgage with the support of the Help to Buy scheme.
This analysis showed that the Midlands and the Northwest are the most affordable regions for purchasing a new home using averaged market value data, the SCSI said.
“The most unaffordable regions to the average first-time buyer are the GDA region, Galway region and the Cork region. The combined minimum salary levels required to purchase a new 3-bed-semi-detached house in the GDA ranges from, on average, €127K in the GDA and €115K in Galway to €85K and €87K in the Northwest and Midlands, respectively.”
Mr Mahon said the SCSI’s analysis showed that Government supports aimed at addressing viability and affordability are making a noticeable impact.
The President of the SCSI, Enda Mc Guane, said: “While there has been a significant increase in the supply of new housing towards current ‘Housing for All’, it is important that we update those targets considering Ireland’s population increases. ‘Housing for All’ targets were based on the 2016 census, and the population has grown by 8%. Therefore, targets need an immediate revision based on the most up-to-date census figures.”
“When setting and committing to new targets, we would also urge the Government to establish new targets for the number of units delivered by off-site construction. This will facilitate a more efficient and sustainable use of resources through the rollout of Modern Methods of Construction.”
“Increasingly, we are seeing the viability of developments that receive planning permission impacted by design or density requirement conditions. We believe financial viability should be required within the planning permission process, especially concerning planning conditions imposed as parts of grants. The SCSI welcomes proposals to increase densities within new housing estates in the draft Sustainable and Compact Settlements Guidelines to help make suburban sites more viable by reducing the requirement for expensive apartment buildings in such estates.”
“On the cost side, we would like to see the continued pausing of development levies made a long-term policy while improvements must be made to the utility connection process to reduce costly and time-consuming delays.”
“The affordability scenarios included in this report show the First-time buyer challenges in certain locations. The SCSI believes the Department of Housing, Local Government and Heritage should review the First Homes Scheme purchase price ceilings to ensure the shared equity scheme is accessible to average market values for each county. The price ceilings should then be adjusted in line with construction inflation to avoid the ceilings becoming inaccessible in the future.”
The SCSI says it undertook an extensive and detailed study of over 8,500 units in 80 development sites throughout the country, with development sizes ranging from small builds to larger developments. The costs quoted are for 3-bed-semi-detached homes of 114 sqm in privately built multi-unit schemes, not one offs or standalone houses.
Credit: SCSI report