A couple earning average wages still cannot afford even the cheapest new apartments in Dublin, according to a new report from the Society of Chartered Surveyors Ireland.
The Real Cost of New Apartment Delivery Report also found most types of apartments are not economically viable for developers to build for sale.
The society’s report found that the situation has improved since its previous study in 2017, with development costs decreasing for two categories of apartments and economic viability also improving.
It stated this was the result of the relaxation of building regulations brought in by ministerial guidelines in 2018, particularly the reduction in car parking spaces and the removal of a requirement that apartments have dual aspect or natural light in two directions.
However, it found that the cheapest two-bed apartment available, which would be a low-spec build in a low-rise suburban development, had a sales price of €375,000.
This would require a deposit of €37,500 and the buyer to have an annual income of at least €96,000.
A couple on average incomes would be earning just €88,000 between them.
The President of the SCSI said supports are needed and that the new Shared Equity Scheme should give apartment buyers a longer payback period because of the higher costs.
Micheál Mahon also said it takes up to 18 months to get a 100-unit scheme to planning and judicial reviews are causing further delay.
“Delays by utility companies, especially Irish Water, are also proving extremely costly and need to be addressed. As this report shows, apartment construction is a costly business,” he said.
The report set out four-category apartment types consisting of low-rise suburban, which is three storeys high; medium-rise suburban (three to six storeys); medium urban (five to eight storeys) and high-rise urban (nine to 15 storeys).
Each category had a range depending on whether the development was high-spec or low-spec.
It calculated that the all-in cost of delivering medium-rise two-bedroom apartments in Dublin ranged from €411,000 for a low-spec unit in the suburbs to €581,000 for a high-spec one in the city.
A profit margin of 15% is then added to see which categories are economically viable for developers to build for homebuyers.
It found that low and medium-rise suburban are viable if they are low-spec, according to current market prices. This is an improvement since 2017 when only low-rise suburban fell into that category.
‘The Real Costs of New Apartment Delivery 2020’ report also found that the actual cost of building a medium-rise apartment makes up 47% of the overall costs.
Other so-called “soft costs”, such as VAT, levies, and fees, make up 42%, with site costs amounting to 11%.
The overall development costs for medium-rise developments have gone down by up to 9% while most categories increased.
Chair of the SCSI working group Paul Mitchell said Build To Rent developments are more economically viable as there are fewer restrictions relating to the apartment mix, car parking and size.
He said they are also more attractive to pension funds, which can take a longer-term view of the asset.
Mr Mitchell added: “It is not surprising therefore that 76% of the units analysed are for rental rather than sale.”
Meanwhile, another report found that Covid-19 had caused a 21% decline in property transactions across the country in the 12 months to November last.
The GeoView Residential Buildings Report View found that in Dublin, the area with the highest number of property transactions was Dublin 15, which includes Blanchardstown and Clonsilla.
The postcode with the lowest average residential property price was €230,233 in Dublin 10, which includes Ballyfermot, while the highest was €771,542 in Dublin 6, which includes Ranelagh.
Source: REsidential - blog.myhome.ie