Not viable to build affortable apartments?

Pixel Eater

https://www.irishtimes.com/news/ireland/irish-news/builders-can-t-make-viable-profit-on-320-000-apartments-1.3218822

According to a government report builders can't make a profit on apartments below €320k. I can't understand this.

Say you've a site that could fit between 3-6 houses on it, depending on the type, size of garden etc. But on the same site you could fit a multi-story apartment building with 30 or so units. It might be more expensive to build the apartments but as it has multiple more units surly it's more profitable?!

The article doesn't go into the exact reason but I keep hearing developers complain about this. Is it because the the building regulations (carpark spaces/lifts/dual aspect etc.) are too stringent thus push up the cost? Too much tax and levies on flats? Or is simply developers thinking houses are more sellable?

LirW

Or is simply developers thinking houses are more sellable?

In my opinion exactly this is the point. People are willing to queue days for houses, there is no problem selling them, they are in high demand. When it comes to apartments, lots of people know some stories about people who got badly burnt when they bought apartments. There still is a big prejudice among the Irish that apartments are either for social housing or renting in your younger years.
My MIL being one of them, she said you need to have a house when you raise kids.
Also the high management charges turn people off, which in fairness can be really high.

But the way housing is being built at the moment in Dublin is incredibly unsustainable and in the long run multi-storey building is the way to go in a city that grows as rapid as Dublin does.

sbsquarepants

LirW wrote: »

There still is a big prejudice among the Irish that apartments are either for social housing or renting in your younger years.
My MIL being one of them, she said you need to have a house when you raise kids.

I get what you mean about the prejudice, but a house is definitely much better for kids. Not exactly a necessity, but certainly very preferable.

A woman I work with was very stressed recently because her daughter was buying an apartment. Her issue was that it was on the ground floor and as such was a beacon for thieves, rapists and murderers. I asked her what floor her house was on and she looked at me like I'd ten heads!

Back to the point however and I just do not believe you can't make a profit building 300k plus "affordable" apartments - that's bullshít plain and simple!

LirW

I get what you mean about the prejudice, but a house is definitely much better for kids. Not exactly a necessity, but certainly very preferable.

And I do think this is a very Irish thing to believe. Millions of families all over the world live in apartments and happily do so. Lots of families across Europe buy apartments over houses. In my country urban apartments are usually even more expensive than houses because it's simply what people prefer in cities. The key is the infrastructure. If the development you live in has playgrounds or you live close to a park it doesn't make much of a difference if you live in a house or an apartment.

Pixel Eater

There is some justification to this snobbery toward apartments though: many of the shoddily built shoe boxes are okay to rent in for a while but they aren't too appealing to pay several hundred grand for and then hefty management fees thereafter.

There is a dearth of good quality apartments in Dublin (and Ireland in general), that's the problem. I've no doubt that if they built spacious, good quality, energy efficient and soundproofed apartments you'd have no trouble finding people willing to buy and live in them.

Borderfox

More than likely the Government just got questions answered by developers rather than somebody/organisation that is independent

dubrov

The article is very very vague without any real details.

There are plenty of one-off new builds all over the country for sale less than €200k.
How can it not be profitable to sell a builder to sell an apartment for 320k.

Of course land prices are a factor, but they are driven by what builders are willing to pay for the land.
If land prices rise high enough to make building unprofitable they will fall

LirW

Isn't Cairn, one of the big builders behind many developments in the greater Dublin area already owning the land they're building on? I think I remember reading something about it with the huge development that's in the planning stage in the Lucan/Adamstown area, that Cairn already owns a huge chunk of land there and wants to build exclusively family homes.

Claw Hammer

Apartments are much more expensive to build than houses for a number of reasons. First of all, many of the sites are brownfield. The planning process is likely to be longer and more complicated. Installing basement car parks is very expensive. Working in a tight inner city site with existing buildings around is trickier, takes longer and is more expensive. The sites also need security while construction is underway. The entire apartment block has to be built in one go, unlike housing schemes where some houses can be sold before construction starts of others. This means there is no cash flow from sales to pay for construction. All funds must be committed before there is any pay back. Labour costs are also higher in inner-city areas. Workers can't park on site, and have to spend longer travelling to work. Fire regulations in apartment blocks are also stricter with houses more time as to be given to inspections.

LirW

Many points you're raising can be applied to Inner city sites in general, not exclusively apartment construction.
People are buying off-plan all the time in various developments in Dublin. Why not apartments too?

Claw Hammer

LirW wrote: »

Many points you're raising can be applied to Inner city sites in general, not exclusively apartment construction.
People are buying off-plan all the time in various developments in Dublin. Why not apartments too?

People only pay a deposit off plan. The balance of the money was not paid over until the keys are handed over. It is possible to hand over a portion of the houses in a development before building the remainder. It can be done with apartments. Very few houses are built in inner-city areas, most are built on greenfield sites.

Markcheese

Is this an attack on the current regulation on apartment building, also the government / local authority fees and charges.. ( not saying it's mightnt be Warented either)
. Yes land costs are high, but proportionately higher for houses and duplexes than apartments.. And houses still need car parking/ amenity space ect as well..

knipex

I suspect its a density and height issue.

To build an apparent block is expensive. Especially if you include underground parking, sufficient lifts, play areas, green areas etc (which is necessary to if you want to encourage families ) To get a return you need density to spread the cost across. To do that you need height. 5 to 6 floors minimum and more in the city center area.

Dublin doesn't do height.

I lived in an apartment with a wife and 2 young kids. Nearly 1000 people lived in the complex, multiple buildings between 6 and 10 stories, lots of green areas, playgrounds, underground parking, BBQ areas, walks, cycle tracks etc.. Good management company, on site security to ensure that no bad behavior was tolerated, place was looked after, no one littered or abused the place as it wasn't tolerated. I was happy there.. My wife less. Her big thing was in a house you could cook in the kitchen and let the kids out to play while keeping an eye on them out the window. In the apartment, if the kids wanted to go out then one of us had to go out..

dubrov

There is no obligation to build underground car parks with apartments.
Developers do it as it is cheaper than purchasing the land for overground car parks

riclad

current rules from the council say there must be one parking space per unit,
this adds 25k cost ,
it should be one per 2 units ,
Also we need high rise area,s where you can build up to
7 storeys .
most single people in dublin do not own a car.
millenilal trend is far less drivers ,use bus,luas if its avaidable.
its harder to get finance for a large apartment block .
a builder builds 10 houses ,sells them, then builds another 10.
So he can pay off the first 10 units .
Apartment block must be finished before selling off anything.
Things like lifts, underground parking are expensive to build .
How much does a site cost to build an apartment block ?
its cheaper to build student housing , the rules on parking spaces
are more flexible .
WE need a bank to provide finance just for low cost housing.

antoinolachtnai

I think the foundation of CIF's remarks are reasonable enough. There are a lot of hidden costs and problems with building apartment blocks.

The biggest problem I see is that it takes at least three years to build one. The costs over this time need to be financed and that adds cost. And there is no real way of knowing what the property market will be like in three years time.

The CIF should have raised this issue four or five years ago, not now. It is a bit late to pipe up about this problem when we are two years into a major housing crisis.

I think the short-term solution here is going to be a completionpayment paid by the government to the builder when the unit is occupied, and a guarantee by the government that they will buy the property at some previously agreed price if the market demand isn't there.

LirW

Claw Hammer wrote: »

People only pay a deposit off plan. The balance of the money was not paid over until the keys are handed over. It is possible to hand over a portion of the houses in a development before building the remainder. It can be done with apartments. Very few houses are built in inner-city areas, most are built on greenfield sites.

Sorry, I genuinely don't understand the first part of what you're saying. You pay the booking deposit, which is refundable. The developer's solicitor issues the contracts, which need to be signed and returned in a certain timeframe, 28 days or something like that (please correct me if I'm wrong). At signing you pay 10% of the sales price as deposit which is non refundable, which for most people is such a large chunk of money that they are fully committed at that point and can't afford to lose this. If the house is priced at 400k, it's 40k non-refundable deposit once you signed.
But at the point they pay their non-refundable deposit when signing the houses are maybe just in the beginning of being build, so there still isn't much there. So they commit themselves financially to something they haven't seen before.

Regarding greenfield sites, it's easily possible putting apartments up in the outer city areas, with 4 or 5 storeys.
Housing people like in the picture I'm linking is much more efficient in a city that struggles with housing as much as Dublin does.

https://www.pericon.at/wp-content/uploads/2016/08/CP-BQ-BA5-Web-3.jpg

sbsquarepants

LirW wrote: »

In my country urban apartments are usually even more expensive than houses because it's simply what people prefer in cities. The key is the infrastructure. If the development you live in has playgrounds or you live close to a park it doesn't make much of a difference if you live in a house or an apartment.

Infrastructure makes all the difference alright, but I still think it's vastly preferable to have your own private garden with kids. It's a whole lot easier to open your back door than to haul the kids off to the park! In fact I've very recently moved from an apartment to a house for that very reason. That being said, a friend of mine lives in an apartment which has it's own private garden, but they are very much the exception in Dublin.

What country are you from by the way?

jimmycrackcorm

Pixel Eater wrote:

Say you've a site that could fit between 3-6 houses on it, depending on the type, size of garden etc. But on the same site you could fit a multi-story apartment building with 30 or so units. It might be more expensive to build the apartments but as it has multiple more units surly it's more profitable?!

The flaw in your argument is that apartments are typically built in dense urban areas where the land price is higher than the equivalent area size in the suburbs.

But no one wants apartments in the burbs.

LirW

I'm Austrian, didn't grow up and only commuted to the capital for a while though. There is a huge demand in new build apartments and they go for horrifying prices. But I think the difference is that cities wouldn't grant permission for building developments like you see in Ireland. The eastern cities have to solve housing issues with a huge influx of migrants since we were one of the Balkan route transit countries and within a timeframe of two years Vienna had to house around 100k people more.
I mean I grew up in apartments, moved various times and my mother bought a small terraced house when I was around 15, at that point it wouldn't make much of a difference anymore for me.

I just think from a long term planning point of view the current roll-out of housing developments is non sustainable over the course of the next decades.

antoinolachtnai

The problem with medium-rise (well, 7 storeys isn't really that high) without a lot of parking is that we have very poor public transport. We really don't have that many suitable sites. But we do have to solve this problem.

If the government guaranteed to purchase apartments, that would solve a lot of the financing problem.

sbsquarepants

jimmycrackcorm wrote: »

But no one wants apartments in the burbs.

I'm not at all sure about that.

I'd say there are any number of people who grew up in your typical leafy suburb, would love to buy a place of their own, but just can't afford a nice house like Mammy and Daddy's.
I'd say they'd jump at the chance to stay in the same area in a more affordable apartment, rather than go frontiering to the wilds of Talafornia or something along those lines.

Cuddlesworth

jimmycrackcorm wrote: »

But no one wants apartments in the burbs.

Because it makes no sense. High density means you need the infrastructure to support it. Thousands of units add huge strain on all manner of public infrastructure and most of our suburbs can't handle it. Anybody familar with large estates that have gone up in established suburbs are aware of the parking problems, water pressure drops and traffic nightmares that arise from it.

At odds to that, the city center makes the most sense for high density apartment and office space. All the infrastructure is already there for the most part and the public transport goes everywhere(unlike the rest of the city) and everything in the city is within walking distance. Meaning you don't need parking, its become a accepted part of living there.

And a fair portion of those renters in the burbs would move in a heartbeat to the center is if was in anyway viable.

But most of the city center is "protected" as listed buildings, there is a obvious height restriction in place and planning is a pain.

sbsquarepants

Cuddlesworth wrote: »

.

And a fair portion of those renters in the burbs would move in a heartbeat to the center is if was in anyway viable.

But most of the city center is "protected" as listed buildings, there is a obvious height restriction in place and planning is a pain.

Again, I'm not so sure.

Personally speaking I have zero interest in city centre living - doesn't appeal to me in the slightest, it never did. Of all the people I know - the vast majority wouldn't like it much either.

knipex

sbsquarepants wrote: »

I'm not at all sure about that.

I'd say there are any number of people who grew up in your typical leafy suburb, would love to buy a place of their own, but just can't afford a nice house like Mammy and Daddy's.
I'd say they'd jump at the chance to stay in the same area in a more affordable apartment, rather than go frontiering to the wilds of Talafornia or something along those lines.

That makes no sense.

You get all the disadvantages of apartment V's house but none of the advantages of living in a city center..

It like someone buying a 3 bed semi in an estate in a rural environment..

LirW

It like someone buying a 3 bed semi in an estate in a rural environment..

I bought an End of terrace in the shticks
Simply because I wanted to get out of the city but it has just the right size of what I want to maintain (not a huge gardener myself) and the space is just about right for cleaning and maintaining.

Mickiemcfist

knipex wrote: »

That makes no sense.

You get all the disadvantages of apartment V's house but none of the advantages of living in a city center..

It like someone buying a 3 bed semi in an estate in a rural environment..

I'm with SBsquarepants on this, I went to school in Blackrock/Stillorgan and would ideally like to buy in or around the area, I'd jump at an apartment in that area rather than a house anywhere else. The City doesn't appeal to me whatsoever.

Markcheese

jimmycrackcorm wrote:

The flaw in your argument is that apartments are typically built in dense urban areas where the land price is higher than the equivalent area size in the suburbs.

jimmycrackcorm wrote:

But no one wants apartments in the burbs.

Think you've put your finger on it... Lands expensive in the centre... It's cheaper in the burbs, but if you're gonna live in the burbs with poor infrastructure.,then you don't want an apartment... And because we don't really do apartments the available land in the burbs is a long way out...
. . And Because of the regs on dual aspect, parking, number of lifts ect, it's more profitable to build high value apartments, and they'll sell because of our disfunction market..

riclad

no one forces people with children to buy apartments,
i agree in general its easier for someone with children to live in a house with a garden.
Many city centre houses just have a small yard at the back.
We need more housing for single people and for familys.
We need a mixture of houses and one bed or 2 bed apartments.
Many single people buy apartments because they are cheaper , it may be easier to get a loan on a 1bed apartment than a 3bed house.
At least in the city centre theres plenty of public parks in most area,s.

LirW

Current one beds in the city require a higher deposit though as far as I know and are in demand for investors and professional LLs because the yields at the moment are very good.

pwurple

LirW wrote: »

Current one beds in the city require a higher deposit though as far as I know and are in demand for investors and professional LLs because the yields at the moment are very good.

Nope.

Yields are very poor because of the 2% rent cap in pressure zones, aka cities.