Builders say apartment construction is basically non-viable without funds involved

According to an article "Builders say apartment construction is basically non-viable without funds involved".

How can this be tackled considering the huge number of people in Dublin paying between €15,000 and €20,000 a year in rent when the mortgage on the same apartment would be less and who would gladly be paying a mortgage instead of rent?

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https://www.irishtimes.com/news/ireland/irish-news/housing-plan-q-a-will-new-reforms-help-the-current-crisis-1.4569442

JimmyVik

All the people who were anti-apartment over the years, especially myself, need to think about buying even a 1 bed apartment at this rate to get out of the rent trap.
In another couple of years all you will be able to afford is a co-living apartment. And a few more years after that and you are doomed to rent forever because you wont even be able to buy a co-living space.
Next comes inter-generational mortgages.
Yes, it really is looking that bleak.

antoinolachtnai

Solution to this is simple. Government agrees to buy these apartments if other suitable buyers can’t be found.

antoinolachtnai

antoinolachtnai wrote: »

Solution to this is simple. Government agrees to buy these apartments if other suitable buyers can’t be found.

Builders would absolutely gouge the government and by extension us taxpayers on the price. It is a disaster whenever the government gets involved in construction projects as everything automatically doubles or triples in price.

JimmyVik

JimmyVik wrote: »

All the people who were anti-apartment over the years, especially myself, need to think about buying even a 1 bed apartment at this rate to get out of the rent trap.
In another couple of years all you will be able to afford is a co-living apartment. And a few more years after that and you are doomed to rent forever because you wont even be able to buy a co-living space.
Next comes inter-generational mortgages.
Yes, it really is looking that bleak.

100% agree. I was very anti buying an apartment but at the moment I am throwing away a huge amount of money each year in rent which is stopping me from saving for a deposit. Myself and my girlfriend are paying just under €20,000 per year in rent for a 2 bed apartment on the northside of Dublin!

is_that_so

Isn't there still a requirement to give over a complete floor to car parking in a block? Most of the construction claims seem to be about levies.

antodeco

I'm paying close to €24k a year for a 2 bedroom apartment on my own. I need the second bedroom for my kids when they're here. It's horrible as I could get a decent mortgage with ownership of a home, for less than my rent, but banks say I can't pay a mortgage as I don't have enough saved (due to rent!)

Murph85

Their claim could stack up. The government are creaking.g off 50k in vat on a 450k ish apartment ket them cut the vat...

Iguarantee

whatnow! wrote: »

100% agree. I was very anti buying an apartment but at the moment I am throwing away a huge amount of money each year in rent which is stopping me from saving for a deposit. Myself and my girlfriend are paying just under €20,000 per year in rent for a 2 bed apartment on the northside of Dublin!

My view on renting, and in particular the scenario you’ve described yourself in, is that the €20k pa is the price you pay for the lifestyle you want to live (or are living whether you want it or not).

If you want to live in the capital city then rent will be more. The closer you get to the nucleus the more expensive it’ll be.

I wanted a house in area X, I couldn’t afford it so I bought a house in area Y, was lucky enough to get a job that was right beside Y. I previously worked abroad, taking circa. 100 airline flights a year, 3 to 4 hour commute each day etc etc.

Perhaps I’m fortunate that I have in demand professional skills that offer some degree of flexibility but if I was living in Dublin and had had enough of the rent/location/setup then I’d make a plan and get the hell out of there.

I bought a house about 18 months ago. The prices in general were very high i.e. I didn’t see the value I’d get matching the price they charged. I saw new build 4-bed detached houses for nearly €800k in Cork city about 18 months ago. Lunacy! People are paying these prices so that’s what the houses are worth. When people stop paying them then people will stop charging them.

I can empathise with your situation. I wish you luck.

antoinolachtnai

whatnow! wrote: »

Builders would absolutely gouge the government and by extension us taxpayers on the price. It is a disaster whenever the government gets involved in construction projects as everything automatically doubles or triples in price.

You’re highlighting problems but not coming up with any resolutions!

The government isn’t buying the apartment. The punter is. The government is giving a ‘put option’ at a price that punters can afford. The price is fixed at the outset. It is up to the debeloper’s financiers to make sure the property is built to spec in order for the option to be available.

This is a minimalist intervention for the government. The alternative is that the government builds directly.

JimmyVik

whatnow! wrote: »

100% agree. I was very anti buying an apartment but at the moment I am throwing away a huge amount of money each year in rent which is stopping me from saving for a deposit. Myself and my girlfriend are paying just under €20,000 per year in rent for a 2 bed apartment on the northside of Dublin!

Imagine if we had all bought 1 bed apartments a few years ago, how much (the difference between rent and the interest on the mortgage) we could be putting away each month now towards a bigger house down the line.
Instead we would rather not buy the apartment and keep paying rent through the nose in the "hope" that some day we could save enough, but sure we are spending the potential savings on rent instead.

JimmyVik

antodeco wrote: »

I'm paying close to €24k a year for a 2 bedroom apartment on my own. I need the second bedroom for my kids when they're here. It's horrible as I could get a decent mortgage with ownership of a home, for less than my rent, but banks say I can't pay a mortgage as I don't have enough saved (due to rent!)

Start by buying a 1 bed apartment. Put a mattress or a sofabed in the living room for the kids when they are over. Save the extra over €1k a month that you are saving in rent. In a few years trade up again.
This needs to be done in steps now. Because waiting doesnt work anymore.

hmmm

The problem for the builders is they need a ton of money upfront to build an apartment block. Building an individual house is not so bad.

The banks aren't going to lend builders 40 million to build apartments. They might lend them 2 million to build a few houses. In the first case, the builder requests 40 million, it's tied up for 2 years, then repaid. In the case of the houses they get 2 million, build 10 houses, and repay it in a few months.

I generally dislike state interference, but in this case I think there is something to be said for the state providing funding as there is a market failure. Unfortunately then you'd hear the opposition going on about the state funding private developers and taking risk won't anyone think of the banking crisis, etc etc etc. I don't know why to be honest a FF/FG government seems to be taking their instructions from SF - get out there and do what they know needs to be done.

selassie

how do builders in other countries finance apartments? Why isn't it semi D land in every other capital city too if apartments aren't viable.

FromADistance

hmmm wrote: »

The problem for the builders is they need a ton of money upfront to build an apartment block. Building an individual house is not so bad.

The banks aren't going to lend builders 40 million to build apartments. They might lend them 2 million to build a few houses. In the first case, the builder requests 40 million, it's tied up for 2 years, then repaid. In the case of the houses they get 2 million, build 10 houses, and repay it in a few months.

I generally dislike state interference, but in this case I think there is something to be said for the state providing funding as there is a market failure. Unfortunately then you'd hear the opposition going on about the state funding private developers and taking risk won't anyone think of the banking crisis, etc etc etc. I don't know why to be honest a FF/FG government seems to be taking their instructions from SF - get out there and do what they know needs to be done.

Also add in building regulations like dual aspect apartments which increases costs and limits design & its no wonder we are where we are.

antoinolachtnai

antoinolachtnai wrote: »

You’re highlighting problems but not coming up with any resolutions!

The government isn’t buying the apartment. The punter is. The government is giving a ‘put option’ at a price that punters can afford. The price is fixed at the outset. It is up to the debeloper’s financiers to make sure the property is built to spec in order for the option to be available.

This is a minimalist intervention for the government. The alternative is that the government builds directly.

Give 100% mortgages based on ability to pay a rent that is 80% of the rent that is currently being paid. Retain the income limits. Put a bit extra on the interest rate if it will compensate for the risk. Anything to avoid a situation where someone is paying €20,000 in rent and can't save a deposit as a result when a 100% mortgage would cost 80% of the rent amount. If there is a ready stream of buyers approved by a bank then that bank can lend the money to the developers to build and get paid on both ends.

The problem in 2007/08 was that they were giving mortgages grater than 3.5x income and giving 2 and 3 mortgages to someone on €60k to get the bonuses.

Bring back 100% mortgages but with added restrictions so that things don't go crazy again.

listermint

FromADistance wrote: »

Also add in building regulations like dual aspect apartments which increases costs and limits design & its no wonder we are where we are.

There are rules like this in other countries. We act like it's unique. There are builders in other countries building apartments.

What I will say is builders are a lobby group they have self interest always at the fore front..so any claims they come out with have to be heavily scrutinized.

antoinolachtnai

I fear that this would drive prices up to unsustainable levels without doing much to stimulate supply.

Heraclius

selassie wrote: »

how do builders in other countries finance apartments? Why isn't it semi D land in every other capital city too if apartments aren't viable.

This is the question I wish the media would ask more.

FromADistance

whatnow! wrote: »

Give 100% mortgages based on ability to pay a rent that is 80% of the rent that is currently being paid. Retain the income limits. Put a bit extra on the interest rate if it will compensate for the risk. Anything to avoid a situation where someone is paying €20,000 in rent and can't save a deposit as a result when a 100% mortgage would cost 80% of the rent amount. If there is a ready stream of buyers approved by a bank then that bank can lean the money to the developers to build and get paid on both ends.

The problem in 2007/08 was that they were giving mortgages grater than 3.5x income and giving 2 and 3 mortgages to someone on €60k.

Bring back 100% mortgages but with added restrictions so that things don't go crazy again.

Mortgage lending is restrictive enough as it is without adding more barriers. FTB's effectively are already getting 100% finance for new homes. What maybe helpful would be a scheme to help people who want to purchase a secondhand house and who are first time buyers. How in ever what you are suggesting would invariable mean breaking current income multiples. Other costs, such as land, need to be examined. Also the culture of increased costs per property phase needs to be examined - in the Netherlands, the cost of a new house is the same no matter how many phases are in the development. The cost of land is also regulated.

javaboy

JimmyVik wrote: »

Start by buying a 1 bed apartment. Put a mattress or a sofabed in the living room for the kids when they are over. Save the extra over €1k a month that you are saving in rent. In a few years trade up again.
This needs to be done in steps now. Because waiting doesnt work anymore.

Can't speak for antodeco but this may not be an acceptable option for custody arrangements etc.

FromADistance

FromADistance wrote: »

Mortgage lending is restrictive enough as it is without adding more barriers. FTB's effectively are already getting 100% finance for new homes. What maybe helpful would be a scheme to help people who want to purchase a secondhand house and who are first time buyers. How in ever what you are suggesting would invariable mean breaking current income multiples. Other costs, such as land, need to be examined. Also the culture of increased costs per property phase needs to be examined - in the Netherlands, the cost of a new house is the same no matter how many phases are in the development. The cost of land is also regulated.

I think that mortgage lending is quite restrictive but with good reason.

A mortgage should not be a noose around the neck of someone for 25-30 years where they (a couple) are constantly struggling to meet the monthly payment for a 3 bed semi when they work full time and have skilled jobs because they had to borrow 6x their income to get a home.

The cost needs to be tackled from every angle but renters also need a place to live.

I don't have the answers but the current situation has to change and I'm not seeing anything from our government that will make a noticeable difference.

paul71

listermint wrote: »

There are rules like this in other countries. We act like it's unique. There are builders in other countries building apartments.

What I will say is builders are a lobby group they have self interest always at the fore front..so any claims they come out with have to be heavily scrutinized.

Quick google found me a nice new 1500 sq meter for 250k in Berlin. We must have very expensive concrete here.

jimmycrackcorm

selassie wrote: »

how do builders in other countries finance apartments? Why isn't it semi D land in every other capital city too if apartments aren't viable.

Because banks in other countries don't have the disastrous history the Irish banks have from the boom, don't have the heavy capital reserve requirements, and actually can repossess properties without significant legal costs taking years.

There's a reason banks are pulling out of Ireland and not those other countries.

Other factors - Irish people prefer semi-d's; Apartment blocks here always seem to get objections that lead to lower density and have planning restrictions.

Browney7

hmmm wrote: »

The problem for the builders is they need a ton of money upfront to build an apartment block. Building an individual house is not so bad.

The banks aren't going to lend builders 40 million to build apartments. They might lend them 2 million to build a few houses. In the first case, the builder requests 40 million, it's tied up for 2 years, then repaid. In the case of the houses they get 2 million, build 10 houses, and repay it in a few months.

I generally dislike state interference, but in this case I think there is something to be said for the state providing funding as there is a market failure. Unfortunately then you'd hear the opposition going on about the state funding private developers and taking risk won't anyone think of the banking crisis, etc etc etc. I don't know why to be honest a FF/FG government seems to be taking their instructions from SF - get out there and do what they know needs to be done.

They're already doing this and leasing it back off the developer once finished. ISIF backed Activate Capital which backed Bartra which rented to DCC http://www.activatecapital.ie/backing-enhanced-lease-social-housing/

c.p.w.g.w

paul71 wrote: »

Quick google found me a nice new 1500 sq meter for 250k in Berlin. We must have very expensive concrete here.

Apartment or house

paul71

c.p.w.g.w wrote: »

Apartment or house

Apartment.

Fred Cryton

JimmyVik wrote: »

All the people who were anti-apartment over the years, especially myself, need to think about buying even a 1 bed apartment at this rate to get out of the rent trap.
In another couple of years all you will be able to afford is a co-living apartment. And a few more years after that and you are doomed to rent forever because you wont even be able to buy a co-living space.
Next comes inter-generational mortgages.
Yes, it really is looking that bleak.

Or you could just move out of Dublin. That's how most people in most countries cope with things, they react to the market and change their circumstances.

Fred Cryton

selassie wrote: »

how do builders in other countries finance apartments? Why isn't it semi D land in every other capital city too if apartments aren't viable.

Other countries have a functional banking system, where if people don't pay their mortgage the bank can take back possession of home. This allows banks to lend much more freely and you don't have the reliance on funds for finance.



Ireland has a dysfunctional banking system due to lefty populist rhetoric which says basically the bank can never get their asset back.



Now those same people are voting even more left. They'll never learn, they're only hurting themselves.

Outkast_IRE

The quantity surveyors report published earlier this year on apartments was quite telling. It is currently costing over 300k to build a 2 bed apartment in Dublin and similar in many other areas. If it's costing them that much to build it then the rents need to be maintained at current levels to make it viable . This is where it gets dangerous as it's now in the REITs interest to buy everything in sight and maintain current prices or higher or they will fail.

A quick Google or search on the chartered quantity surveyors website will find the report for you.

selassie

selassie wrote: »

how do builders in other countries finance apartments? Why isn't it semi D land in every other capital city too if apartments aren't viable.

Who knows lower cost base, functional banking system, lower standards etc.


Building lobby is only out for itself like the rest of us, but when an industry completely controlled by the government grinds to a halt then I think we need to look at it more closely.


But all we get now are builders saying it can't be done and no one knows enough to be able to refute this. Academics and journalists who've never built anything have failed us for some reason in unraveling this conundrum.