Developers now claim apartments cost more to construct than houses

The_Conductor

Article in today's Indo here: https://www.independent.ie/business/personal-finance/property-mortgages/apartments-now-cost-more-to-build-than-houses-experts-36255926.html

Suggestions:

Remove-

requirement for car parking (€2,000-€36,000 per unit)
Development levies (€10,000-€13,000),
cheaper finance at 7pc (€5,000-€11,000), a
9pc Vat rate (€13,400-€19,820) and
making apartments 10pc smaller (€6,000-€9,000)

Currently developers say they need a 12% profit margin for a development to make financial sense after all costs are enumerated- which currently averages €52,000 per apartment.

The most startling item in the list of proposed methods to reduce building costs- is to make apartments 10% smaller. If there was a similar cost associated with making them 10% bigger- I can only imagine a significant number of prospective buyers would be overjoyed- they might even pay a premium.

The 12% profit margin for builders- seems excessive to me.

All-in-all- it comes across as a builder's wish-list- where prospective buyers and the taxpayer are expected to pad super-normal profits for developers.

An average of 52k profit per unit- seems quite remarkable to me- and the obvious thing to discuss- is what is a reasonable profit level that isn't taking everyone for fools. If we can't get to a reasonable level- what can we do to secure our housing stock- I'd argue getting rid of the plethora of housing associations and getting the local authorities to cop the hell on- construct units- and manage them- in a perpetual manner- is what needs to happen.

A few suggestions- such as removing the height restrictions in Dublin- are no-brainers- they should have been done years ago- however, the current situation where developers are crying crocodile tears, because they're only making 50k per unit- is appalling- and needs to be addressed.

Stoner

The_Conductor wrote:

The 12% profit margin for builders- seems excessive to me.

The 12 percent was for the developer.
The developers achieve the highest margins. The builders make a lot less than that and carry a lot of risk.
It's why builders try to be developers and builders. Saw a good few down the last day though

The_Conductor

Stoner wrote: »

The 12 percent was for the developer.
The developers achieve the highest margins. The builders make a lot less than that and carry a lot of risk.
It's why builders try to be developers and builders. Saw a good few down the last day though

Aka- the developer gets a 50k cut per unit- *after* all other costs- including all building costs are enumerated......... That seems nuts.

listermint

What's the average profit margin in the rest of Europe. That's a place to start

Browney7

The report was attributing a land cost of up to 120k per unit if I was reading that correctly - land speculation and people needing a pay day clearly feeding into the price aswell.

The one parking space between two for city apartments could make sense. In twenty years time it's likely all cars will be driverless so private car ownership might take a dip as we move to sharing platforms.

Id favour some reduction in levies if they were accompanied with commensurate price reductions (oh look, a flying pig)

Cuddlesworth

The_Conductor wrote: »

Aka- the developer gets a 50k cut per unit- *after* all other costs- including all building costs are enumerated......... That seems nuts.

Expected margins are usually in relation to risk. The timeline and volatility of our market means that 12% wouldn't be unusual.

On the other hand if there was a housing market that was stable and in-line with inflation, it would be unreasonable.

Graham

Cuddlesworth wrote: »

Expected margins are usually in relation to risk. The timeline and volatility of our market means that 12% wouldn't be unusual.

On the other hand if there was a housing market that was stable and in-line with inflation, it would be unreasonable.

+1

Does anyone know if the 12% figure is gross or net?

Cuddlesworth

Graham wrote: »

+1

Does anyone know if the 12% figure is gross or net?

No idea, since the report hasn't actually been published that I can see.

listermint

listermint wrote: »

What's the average profit margin in the rest of Europe. That's a place to start

I'd love to know where all the money goes when building a house in Ireland. Some of my friends moved to a higher-wage country and the housing is much higher standard and far, far cheaper. Really beggars belief.

jimmycrackcorm

Stoner wrote:

The 12 percent was for the developer. The developers achieve the highest margins. The builders make a lot less than that and carry a lot of risk. It's why builders try to be developers and builders. Saw a good few down the last day though

The developers carry all the risk which is why building stagnated since the financial crash. Builders have a straight forward pricing for their work.

listermint wrote:

What's the average profit margin in the rest of Europe. That's a place to start

And what if it is the same or higher?

Deleted User wrote:

I'd love to know where all the money goes when building a house in Ireland. Some of my friends moved to a higher-wage country and the housing is much higher standard and far, far cheaper. Really beggars belief.

That's no different to an IT worker in Ireland who doesn't work and live in Dublin for example.

But try being an IT worker working in Seattle or San Francisco as a comparison.

Fkall

listermint wrote: »

What's the average profit margin in the rest of Europe. That's a place to start

Circa 25-30% as per results of the public UK & French builders.

The_Conductor

Fkall wrote: »

Circa 25-30% as per results of the public UK & French builders.

How does this relate to the gross average margin of 50k per unit here?
I suspect the average in the UK and France- is significantly lower than here (but I don't have any hard data on which to base this hypothesis).

PMBC

Cuddlesworth wrote: »

Expected margins are usually in relation to risk. The timeline and volatility of our market means that 12% wouldn't be unusual.

On the other hand if there was a housing market that was stable and in-line with inflation, it would be unreasonable.

I always felt it strange that in the years when Ireland had housing builds of up to 90,000 units price were still 'up'. Its not a true market. Prices are controlled by the big developers. Generally builders, and I'm not one and have no connection with any, have very tight profit margins. Also developers were selling off plan and generating substantial income to offset outgoings before commencement. We've all seen it - Phase 1 is selling well so up the price of Stage 2 overnight/week-end. The volatile market has always been upward except for the 08 crash. If there was another time I'd be glad to be corrected.
As in a lot of foolish things, government here followed the UK example and privatized public housing. Either purchase from private develpers or have developed by Approved Housing Bodies, AHBs. Public housing has almost been completely constructed by private bulders in Ireland but developed by Local Authorities except in the late 19C and early 20C. There is a place for AHBs but not as currently set-up.
There always was in councils and still is a strong interest in developing public housing. They were replaced by government policy and will take some months to get 'tooled up' to get started again. I'm not a council employee or builder or contractor. I know with reasonable certainty, that for by far the greatest part, council housing was far better constructed than private, certainly from 1990s. One of the main reasons was that there was, unlike the private, speculative sector, high quality supervision. Building Control/Building Regulations was supposed to take care of that problem. But self-certification and one-off companies set up to develop a particular scheme, put paid to all of that.
The only thing, IMHO, that will cause the government to act forcefully, as they seem to be considering doing with the banks, is reputational damage and loss of foreign direct investment + Brexit movers from UK. The price of housing for potential incoming workers is putting foreign companies. I was interested to read that the Central Bank has the same impression as mentioned in a leaked document last week.

m5ex9oqjawdg2i

listermint wrote: »

What's the average profit margin in the rest of Europe. That's a place to start

No, no it's not. Considering almost every aspect of life is different in every single European country.

Do you compare your wage to those in Switzerland when applying for jobs? I doubt it.

Fkall

The_Conductor wrote: »

How does this relate to the gross average margin of 50k per unit here?
I suspect the average in the UK and France- is significantly lower than here (but I don't have any hard data on which to base this hypothesis).

I should have been clearer - the net profit as a % of turnover is circa 25-30%

The gross margin in all but the most extreme of circumstances will be higher.

wordofwarning

The_Conductor wrote: »

Aka- the developer gets a 50k cut per unit- *after* all other costs- including all building costs are enumerated......... That seems nuts.

Is it really? You would expect property development in Ireland to carry a massive risk premium considering if you **** it up, you are public enemy number 1. You can expect the papers to report your daily life for up to a decade, you lose everything you own etc etc. Yet you think the profit should be modest?

Most apartment developments in Dublin are small. They are not 50/60 storey blocks of hundreds of apartments like in London or NYC. You would expect small scale projects to carry a higher margin.

The car space is the biggest killer according to most developers. The headless chickens in DCC seem to think everyone living in gridlocked Dublin 1/2 want/need a car space, so pretty much a ton of new apartments are expected to have them. If they were optional and not compulsory, most people would not want them.

listermint

Brooks Mango Puzzle wrote: »

No, no it's not. Considering almost every aspect of life is different in every single European country.

Do you compare your wage to those in Switzerland when applying for jobs? I doubt it.

Im not sure what wages have to do with profit margin.


..

riclad

There should be a rule if theres a bus stop or luas stop within 1 mile of the site , then make it one car parking space per 3 units.
In dublin city ,most young people under 30 do,nt own a car ,
They use luas,bus , taxis, or cycle to work .
Maybe this is off topic i read an article we need 70 thousand housing workers .
If we wanted to build 20k plus housing units per year.
Its a catch 22 ,rents are high.
Where would these workers live,
when even students find it hard to get a flat.
Many workers have left ireland since 2006 .
We have a shortage of building workers .
Local authoritys and various government agencys own land where 50k units could be built around dublin.
a Builder built 30 houses in ballymun last year ,on council owned land.
They cost around 130k to build.
2 and 3 bed house,s .
Let them build up to 8 storeys in certain areas.
A lift for an 8 storey unit costs about the same as one for a 5 storey building.
The funny thing is the council seems intent to reduce car s going into
dublin city by various traffic measures .
But they think every single person must have 1 car parking space.

godtabh

Browney7 wrote: »

The report was attributing a land cost of up to 120k per unit if I was reading that correctly - land speculation and people needing a pay day clearly feeding into the price aswell.

The one parking space between two for city apartments could make sense. In twenty years time it's likely all cars will be driverless so private car ownership might take a dip as we move to sharing platforms.

Id favour some reduction in levies if they were accompanied with commensurate price reductions (oh look, a flying pig)

DCC don't allow any car parking in city centre locations no. Makes sense.

I worked on a project a couple of years ago. I cost the price of one car parking space for a development in Cabra. Land, construction and maintenance costs where about €45k per space.

Fliucharbith

I intimated it in another thread, but I'll say it more clearly here; there is something rotten at the heart of property issues in Ireland (and most developed countries in the world).

The thing about removing car park spaces, for example, just screams "short-term solution". And saying its only short term is generous.

We need to get to the root of the problem and the biggest barrier to that is the ever-increasing amount of spurious detail. The problem/solution isn't car parking spaces, as much as it isn't about red tape. We cannot see the forest for the trees anymore.

Demand is too high, space is too little, employment opportunity is overly condensed, inflation disparity between costs and income, free houses for some while others will never be able to afford one.........and on and on.

Either concentrate on reducing the population, or take a drastic wrecking ball to the whole thing and start again with working policies and pragmatic strategies.

Theres a lot to be said for a controlled explosion versus waiting for it to fall down on top of you at any given moment.

The government are NOT going to build enough accommodation, its simply not going to happen! So instead of tackling the problem head on, we continue to kick the can down the road while fretting over who builds a few apartments in some tiny spot that will never solve anything.

Cuddlesworth

Fliucharbith wrote: »

The government are NOT going to build enough accommodation, its simply not going to happen! So instead of tackling the problem head on, we continue to kick the can down the road while fretting over who builds a few apartments in some tiny spot that will never solve anything.

Your right, the government is not going to build enough accommodation. Because when they do we end up with a council estate and the problems that come with them.

So lets break down the rhetoric.

Fliucharbith wrote: »

The thing about removing car park spaces, for example, just screams "short-term solution". And saying its only short term is generous.

We have a public transport system in which 90% of the routes go directly to and from the city centre. The vast majority of public transport users, use the service during rush hour to travel into the city in the morning and leave the city in the evening.

By removing car parking space requirements in the city centre, we remove the need for sub basements below the water line(huge construction costs there), allowing people who wish to avail of a walk to work to do so, or using the underutilised public transport to leave the city and get to some of the major employment centres with ease(Citywest/Sandyford for example).

If you want to say that cars going against the flow of traffic from the city center outbound would also work, I'm afraid not. Due to the fact that we have a rather large river in the middle of the city, there are really only 2 options for South/North traffic to take, the M50 or the city. Both directions within the city are gridlocked in the morning and without the use of Bus corridors and traffic calming measures by Dublin City council, Bus's would be gridlocked too.

Keeping in mind that our City is hundreds of years old. We are not going to be able to simply build better roads to alleviate the issue

Fliucharbith wrote: »

We need to get to the root of the problem and the biggest barrier to that is the ever-increasing amount of spurious detail. The problem/solution isn't car parking spaces, as much as it isn't about red tape. We cannot see the forest for the trees anymore.

You must have missed the memo about the new planning fast track process. But its worth keeping in mind that we have estates upon estates of housing built on flood plains, that have flooded multiple times, because estates were fast tracked by local Councillors removing red tape.

Fliucharbith wrote: »

Demand is too high, space is too little, employment opportunity is overly condensed, inflation disparity between costs and income, free houses for some while others will never be able to afford one.........and on and on.

This is nothing new in Ireland or in similar places in the world. But its hyperbole, you can afford property if you work for it. Nothing is out of reach, unless you have decided that you should be able to compete with people who out earn you.

Fliucharbith wrote: »

Either concentrate on reducing the population, or take a drastic wrecking ball to the whole thing and start again with working policies and pragmatic strategies.

Theres a lot to be said for a controlled explosion versus waiting for it to fall down on top of you at any given moment.

Ahh Eugenics. Or can you point to a country that does things better and explain how or why those policys could be applied here?

Geuze

https://www.scsi.ie/documents/get_lob?id=1338&field=file

2017 SCSI report on apartment costs

CruelCoin

The_Conductor wrote: »

Article in today's Indo here: https://www.independent.ie/business/personal-finance/property-mortgages/apartments-now-cost-more-to-build-than-houses-experts-36255926.html

Suggestions:

Remove-

requirement for car parking (€2,000-€36,000 per unit)
Development levies (€10,000-€13,000),
cheaper finance at 7pc (€5,000-€11,000), a
9pc Vat rate (€13,400-€19,820) and
making apartments 10pc smaller (€6,000-€9,000)

Also remove the 10% requirement for social housing and you're golden.

matrim

Cuddlesworth wrote: »

We have a public transport system in which 90% of the routes go directly to and from the city centre. The vast majority of public transport users, use the service during rush hour to travel into the city in the morning and leave the city in the evening.

By removing car parking space requirements in the city centre, we remove the need for sub basements below the water line(huge construction costs there), allowing people who wish to avail of a walk to work to do so, or using the underutilised public transport to leave the city and get to some of the major employment centres with ease(Citywest/Sandyford for example).

If you want to say that cars going against the flow of traffic from the city center outbound would also work, I'm afraid not. Due to the fact that we have a rather large river in the middle of the city, there are really only 2 options for South/North traffic to take, the M50 or the city. Both directions within the city are gridlocked in the morning and without the use of Bus corridors and traffic calming measures by Dublin City council, Bus's would be gridlocked too.

People use cars for more than just going to work. They use them at weekends to go visit family / friends, for shopping, for day trips out of the city. And some people need to drive as part of their job. Getting rid of the parking spaces is just re-enforcing the idea that apartments are somewhere you live for a few years in your 20s while you wait to get your 3 bed semi in the burbs.

In most of the apartment blocks I've lived in, the car park was generally at least 70% in use, and in a couple there were shortages of spaces that caused plenty of issues between residents

Cuddlesworth

matrim wrote: »

People use cars for more than just going to work. They use them at weekends to go visit family / friends, for shopping, for day trips out of the city. And some people need to drive as part of their job. Getting rid of the parking spaces is just re-enforcing the idea that apartments are somewhere you live for a few years in your 20s while you wait to get your 3 bed semi in the burbs.

In most of the apartment blocks I've lived in, the car park was generally at least 70% in use, and in a couple there were shortages of spaces that caused plenty of issues between residents

Parking in the city centre should be limited, its the one place in this country that has good public transport to all other locations. People who wish to purchase those new apartments would make the choice to sacrifice the car, of which plenty will happily make that choice. There are also car rental services that work out cheaper for intermittent car use during the weekends.

server down

Hang on - making apartments smaller is a cost now?

Mrs OBumble

matrim wrote: »

In most of the apartment blocks I've lived in, the car park was generally at least 70% in use, and in a couple there were shortages of spaces that caused plenty of issues between residents

If the carpark is 70% in use, that means that 2 parks for every 3 units is enough.
Car ownership is decreasing, though, as short-term rental options improve and also as a smaller proportion of young people learn to drive.

Fliucharbith

Cuddlesworth wrote: »

Your right, the government is not going to build enough accommodation. Because when they do we end up with a council estate and the problems that come with them.

So lets break down the rhetoric.



We have a public transport system in which 90% of the routes go directly to and from the city centre. The vast majority of public transport users, use the service during rush hour to travel into the city in the morning and leave the city in the evening.

By removing car parking space requirements in the city centre, we remove the need for sub basements below the water line(huge construction costs there), allowing people who wish to avail of a walk to work to do so, or using the underutilised public transport to leave the city and get to some of the major employment centres with ease(Citywest/Sandyford for example).

If you want to say that cars going against the flow of traffic from the city center outbound would also work, I'm afraid not. Due to the fact that we have a rather large river in the middle of the city, there are really only 2 options for South/North traffic to take, the M50 or the city. Both directions within the city are gridlocked in the morning and without the use of Bus corridors and traffic calming measures by Dublin City council, Bus's would be gridlocked too.

Keeping in mind that our City is hundreds of years old. We are not going to be able to simply build better roads to alleviate the issue



You must have missed the memo about the new planning fast track process. But its worth keeping in mind that we have estates upon estates of housing built on flood plains, that have flooded multiple times, because estates were fast tracked by local Councillors removing red tape.



This is nothing new in Ireland or in similar places in the world. But its hyperbole, you can afford property if you work for it. Nothing is out of reach, unless you have decided that you should be able to compete with people who out earn you.



Ahh Eugenics. Or can you point to a country that does things better and explain how or why those policys could be applied here?

For the first bolded, I forgot to include developers as well. Neither government nor developers are going to build anywhere near enough housing. Or to put it more simply, "there wont be enough housing".

As for your explanation on transport routes, I already understood most of the issues with it. And as you rightly say, Dublin is a very old city. So why was housing far more affordable in, say, 1990's? You could talk about Dublin becoming a more international city with international companies etc, but its obviously not a great net gain if it has resulted in basic housing being pulled out from beneath peoples feet.

And you basically say that "it cant be done". And that's just going back to my point that something is very wrong in the greater scheme of things. While car parking spaces are not the be all and end all, what about reducing the size of apartments overall? How about bringing back communal living to save space? In my mind these kinds of proposals are a race to the bottom, going backwards in time. Sure, when there is a refusal to change the parameters of a growing problem, these are the kind of "solutions" you get. Changing the problem at its root is the most difficult thing to accomplish, hence why in typical human fashion we wont.

"You can afford property if you work for it"......I could afford a mars bar even if it cost 500 euro. That's not the point at all, it would be freaking stupid to buy a mars bar for 500 euro, not least because it would have a seriously detrimental effect on the quality of my life over time. And even then, it is simply a fact that a lot of people CANT afford property in Dublin. This is a very American attitude, I believe phrased "pull up your bootstraps"......in other words, society owes you nothing and if you "fail" its all on you, and if you "win" its all down to your own personal, excellent situation. "Pulling the ladder up behind you" might be the other side of the coin. And yet you are the one who mentions eugenics in a disparaging way.

About "eugenics". Reducing the population is not eugenics, for starters. But the reason I threw that solution out there is because its the easiest short-cut, and that seems to be all our leading entities want, short-cuts. Easier than tackling the property issue at its core, and quicker than nit-picking our way slowly to a reduced quality of life.

And finally, no, I cant point to a country that's doing anything better. That was one of my points. But I can certainly see other countries doing the exact same stuff, suffering the exact same problems with the exact same outcomes. That's why economic crashes happen, there isn't a single entity/country willing to do anything proactive. Instead they all just point at each other and say "well, THEY aren't doing any better!" and then throw their hands up in the air and continue plodding toward the inevitable.

dr.fuzzenstein

[Deleted User] wrote: »

I'd love to know where all the money goes when building a house in Ireland. Some of my friends moved to a higher-wage country and the housing is much higher standard and far, far cheaper. Really beggars belief.

From my own personal experience I can say that housing on the continent is of a far higher standard than in Ireland, or at least that was the case till the end of the last boom. Maybe they'll start building proper housing now instead of throwing up the cheapest possible rabbit hutch and sell it for the highest possible price whilst cutting as many corners as possible.
The things you could see were doors, windows and fixtures are far better quality and heavier built in Germany. What you can't see is that walls are built from breeze blocks in Ireland, far cheaper, very bad thermal properties, when insulation came it was far too thin, attics had 5 inches of glass wool, overall build quality was bad. Units would be smaller, in highrise building there would be insufficient parking, no extra storage (you always get a storage cage in the cellar in Germany), no amenities and as Priory Hall has demonstrated, if you can't see it, you don't need it, so no fire safety.
Of course the Irish government has worsened the problem, the classic approach is, first absolutely no regulations and enforcement and when that inevitably goes wrong, smother the sector in regs, levies and taxes until it dies. Then wonder why. Then repeat.
Will this get better? I doubt it. I'd say you will be able to buy a poor house or apartment for enormous money, or you will be able to buy an OK one for outrageous money. A fair deal is not on the cards.

robp

Browney7 wrote: »

The report was attributing a land cost of up to 120k per unit if I was reading that correctly - land speculation and people needing a pay day clearly feeding into the price aswell.

The one parking space between two for city apartments could make sense. In twenty years time it's likely all cars will be driverless so private car ownership might take a dip as we move to sharing platforms.

Id favour some reduction in levies if they were accompanied with commensurate price reductions (oh look, a flying pig)

Driver-less car could make car rides extremely cheap, massively unceasingly traffic and parking needs.

Browney7

robp wrote: »

Driver-less car could make car rides extremely cheap, massively unceasingly traffic and parking needs.

Will your average Mick and Jane spend the money to maintain the cars to the required standard? You can see the standard of maintenance that Irish People think is adequate at the moment. I reckon private car ownership will plummet once full automation comes in negating the need for spaces for apartments. OT over...