Many cities in high-income countries face housing shortages and affordability challenges. Understanding the drivers of construction costs is crucial for addressing these issues, as viability determines whether new supply is feasible. However, comparing costs across different countries is difficult due to variations in construction methods and regulations. The International Construction Management Standards third version (ICMS3) provides a standardised framework for classifying construction costs.
This study uses the ICMS3 framework to compare construction costs for a fixed project across multiple markets. Quantity surveyors (also known as construction cost consultants in some European countries) in ten cities across seven countries were surveyed, utilising the ICMS3 framework to estimate costs for an apartment block initially built in Switzerland. Designed in 2011, this building was proposed for use by Eurostat as the ‘standard apartment’ for capturing residential building costs; its specifications were revised to meet standards prevailing in 2020. The aim was to calculate the cost of building the apartment block as of the first quarter of 2020, before the onset of Covid-19 and global price instability. This report employs a ‘travelling box’ exercise, where quantities involved in building the home are standardised, and held constant across survey responses, to allow for systematic cost comparisons across locations.
This report includes both ‘hard costs’ and ‘soft costs’, along with some exclusions. For the purposes of this report, ‘hard costs’ include ICMS3 elements such as earthworks, equipment, and services (ICMS3 Groups 01-07). Similarly, ‘soft costs’ refer to ICMS3 elements indirectly related to construction and often calculated on a percentage basis of hard costs, in particular ICMS3 Groups 08-10, which cover preliminaries, risk, and taxes. Costs not covered in this report include site acquisition, professional, development and connection fees, finance costs, developers’ margins, and marketing costs. The report does not include the financial viability of projects, nor does the research scope include affordability of housing.
Based on the survey responses, it is possible to compare construction costs across all ten cities, as well as the relative importance of the ten different ICMS3 Groups. Across the markets included, ICMS3 Group 03 (Structure), ICMS3 Group 04 (Architectural Works/Non-Structural Works), and ICMS3 Group 05 (Services and Equipment) were the largest contributors to overall cost for this type of building. In Dublin, the construction cost for delivering an apartment block was calculated as €2,363/m2 (including tax). This means that the cost in Dublin is approximately €300/m2 higher than the ten-city average of €2,057/m2, second only to Zurich.
As outlined in more detail in the report, compared to other EU member states, Ireland has a relatively low VAT rate on new construction. If VAT rates were zero, Dublin would rank as the fifth most expensive city, with a cost similar to the British cities included in the survey. Policymakers must, therefore, look at hard costs to better understand differences in residential construction costs across cities. The analysis here suggests that the price of resources varies far less than more labour-intensive inputs. With more labour-intensive cost headings contributing to higher costs across countries, it is therefore labour costs and productivity that play a significant role in differences. Supply chain considerations appear to be less important with, for example, Belfast (located on the same island as Dublin) one of the cheapest locations among the ten surveyed.
The report also compares the estimates presented here, based on the same specifications, with previous findings on differences in construction costs, including reports from the Society of Chartered Surveyors Ireland (SCSI) and the Irish Department of Housing, Local Government, and Heritage (DoHLGH) on apartment construction costs in Dublin. Sources of difference in costs include timing, survey scope (which costs are included and which are not), and building specifications. This report focuses on building specifications, so when comparing with other reports, adjustments to account for inflation and survey scope are made.
When adjusting the costs of constructing an apartment block in Dublin based on the design presented in this report to Q3 2022 (the latest published date from the DoHLGH), the total cost before tax was €2,558/m2. The adjusted range of costs from the SCSI report for an urban medium-rise apartment, which was decided to be the most comparable to the design used in this report, was between €2,951/m2 and €3,535/m2. For the DoHLGH report, which is based off a Dublin apartment design, the cost of construction was €2,803/m2. Scope differences, such as the DoHLGH report using more expensive facades, highlight the importance of design and specification when conducting such comparison studies. In particular, the lower costs in this study may relate to elements such as the façade treatment: the project in this study has a rendered façade, compared to the brickwork in the DoHLGH project, which is standard for a Dublin project in the 2020s.
Overall, the findings of this report highlight the challenge of high construction costs in Dublin as a barrier to new housing supply, as well as identifying the headings that contribute most to that differential, including Services and Equipment (ICMS 3 Group 05) and Non-Structural works (ICMS 3 Group 04). It is recommended that future analysis explore the determinants of labour productivity, as well as the role of regulatory specifications and standards – rather than market preferences – in driving scope differences. A contribution of this report is to provide a baseline for similar exercises in future years, which could be expanded to include other cities and indeed other property types.