The SCSI publishes ‘The Real Cost of New Housing Delivery 2023’
Report’s Main Findings:
- The average cost of delivering a new 3-bed semi in Ireland ranges from €354K in the Northwest to €461K in the Greater Dublin Area
- Costs in the GDA have increased on average by 24% or €90K 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 €397K
- Excluding Dublin, the average cost across the rest of Ireland is €386K
- As a national average, hard costs which include materials and house building costs make up 53% of overall delivery costs
- Soft costs – land, margin, levies, finance costs, VAT, etc – make up 47%
- The report shows that the combined minimum salary levels required to purchase a new 3 bed semi in the Greater Dublin area is €127K, on average
- The corresponding figure in the Northwest is €85K
- Higher energy, fuel and building material prices are driving hard cost increases
- Soft cost increases are due to land costs, higher finance costs due to interest rate increases and uplift in professional fees
Thursday, 7th December 2023. A major new report has found that the average cost of delivering a new three-bedroom semi-detached house in a multi-unit scheme in Ireland ranges from €354,000 in the Northwest to €461,000 in the Greater Dublin Area.
The report, which has been published by the Society of Chartered Surveyors Ireland (SCSI) found the national average cost of delivering this house type across seven regions by the private sector is €397,000, while the cost is €386,000 when the Dublin region is excluded.
The SCSI’s ‘The Real Cost of New Housing Delivery 2023’ report, which is being launched at the SCSI’s national conference in Croke Park today (Thursday Dec 7th) says the average cost of delivering a 3-bed-semi-detached home in the Greater Dublin Area (GDA) has increased by over €90,000 to €461,000 over the last three and a half years.
This is an average increase of 24% on the €371,000 it cost to build the same house in 2020 and an average increase of 39% since the SCSI published the first edition of this report in 2016 when the cost of building an average 3-bed-semi was €330,500.*
According to the report, the increase over the last three years in the GDA has been largely driven by a rise in ‘hard costs’ – bricks and mortar – up 27% or €49K on average while ‘soft costs’ – land, development levies, fees, vat, margin – increased by 21% or €41K.
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.
“‘Hard costs’, which includes house building costs, siteworks, and site development, ranged from just over €198,000 in the Northwest region to just over €228,000 in the GDA, representing approximately a 15% differential.
“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.
“’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.”
Table 1 Breakdown of the costs in delivering a new 3 bed-semi.
Viability
Using average market value data of new three-bedroom semi-detached properties across the various regions, the report assessed the financial viability of new home building in different parts of the country. Financial viability is determined by subtracting market value from overall delivery costs.
The research shows that financial viability, on average, is most challenged in areas of lower market values. The region where this challenge is greatest is in the Midlands region, where the average viability gap is €52K, followed by the Cork region, €50K and then the Northeast region, €45K. The two areas where the construction of a new 3-bed-semis is most viable on average is Galway and the Greater Dublin Area.
Affordability
In the report, the SCSI also examined affordability from the perspective of a first-time buyer with an average combined salary of €95K 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 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.
However, Mr Mahon said the SCSI’s analysis showed that Government supports aimed at addressing viability and affordability are making a noticeable impact.
Recommendations
The President of the SCSI, Enda Mc Guane, said that the report recommends that more needed to be done to support Modern Methods of Construction, pause future increases to connection charges and levies, as well as ensure the planning process is fit for purpose to de-risk development and bring down cost, which potential homeowners ultimately pay.
“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 first two editions of this report focused solely on the cost of delivering new 3-bed-semi-detached homes in the Greater Dublin Area.
Note
The SCSI 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. It should be noted that 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. Comparisons should not be drawn between this report and other cost reports such as for the defective concrete block scheme or the rebuild calculator for insurance purposes. The data was received in 2023 and rebased to account for inflation that would have been accrued since the projects’ initial tender date. SCSI acknowledges the temporary waiver of development contributions and Uisce Eireann rebate on connection charges. For the purposes of the delivery costs within this report, those charges are included due to the temporary nature of the initiative.
Case Studies
The Affordability Challenge
Scenario one
A first-time buyer couple with a combined gross salary of €100,000 looking to buy a three-bedroom semi-detached home in Dublin for the average price of €534,643. Firstly, the Help-to-Buy scheme does not apply to this house sale as the purchase price exceeds the €500,000 ceiling. This couple will need to come up with the full €53,464 deposit without Help to Buy support. If this couple could only borrow the average 3.3 times their gross income (average Loan to Income borrowing), then they would need additional funds to buy the property. The property’s purchase price is also above the First Home Scheme price ceiling of €475,000, so the applicant is ineligible. This leaves a funding gap of €151,179. See appendix 2 in the report for a full breakdown on the scenario costs.
Scenario two
A first-time buyer couple with a combined gross salary of €100,000 looking to buy a three-bedroom semi-detached home in Cork County for a price of €375,000. If this couple successfully apply for the full €30,000 tax back via Help-to-Buy this could be utilised for their deposit. If this couple could only borrow the average x 3.3 times gross income (average LTI borrowing), they would need additional funds to buy the property. The funding gap is €7,500, and the First Home Scheme could provide this funding gap to conclude the purchase. See Appendix 2 in the report for a full breakdown on the scenario costs.
For further information
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GPR Communications
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