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

hmmm

Deleted User wrote: »

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.

There seems to be straitjackets every way the developer moves. Too many requirements, too much change in regulations.

If it was me I'd remove all requirements except basic safety/fire requirements. I lived in a dark 50 square metres apartment when I first left home and loved it - I hated the idea of sharing a house. If developers want to build blocks with people packed in let them, and people will decide if they want to rent/buy them or not.

The quality might not be great at first for those who want bigger apartments, but over time as the supply problem is solved things will improve and the developers will be forced to build to meet market requirements. If we keep insisting that every apartment has to be suitable for a family and their pony we'll be forever wondering why none are being built.

Pete_Cavan

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.

The standard in many developed world cities is for people to rent long term, even for ever. The obsession with owning property which exists here is not universal. In mature rental markets, most of the apartments are owned by large institutions the likes of which are now buying up whole developments here. These institutions either directly fund the construction themselves or buy from a developer who started the project using other sources of funding.

The situation in Ireland is actually moving towards what is the norm elsewhere. We have still retained aspects of our previous system which are not replicated elsewhere. Our standard 12 month leases need to be replaced with rolling contracts with specified break conditions. This gives the tenant more security that they won't just be turfed out, and also sets the rent at a level and doesn't get renegotiated each year. It is also better for the landlord to ensure continuity of lets, instead having a big turnover of tenants which results in one or more month of lost rent and potentially other costs too (letting, cleaning, etc.). The effective rent roll is less than the total monthly rent x 12 because of lost months and associated costs. Tenants in Ireland pay more each month to cover these costs.

In many places, apartments are let unfurnished and the tenant brings their own furniture, household items, etc. Standard elsewhereis for there to be shared clothes washing/drying facilities and tenants can buy their own if they want. Fitting out hundreds of apartments upfront is an additional cost here, plus then there is ongoing maintenance, replacement, etc. costs. It all gets passed onto the tenant here, and usually the quality is below the price being paid. Other countries have strong second hand furniture markets where people can get items at a good price if they don't want to buy new so can work to their own budget.

Basically, Ireland has adopted some but not all of the system which operates in other countries thus creating a hybrid system which the market has to adapt to while retaining many of our legacy issues.

Markcheese

Fred Cryton wrote: »

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.

But it's not a populist left that's doing that -
It's the judiciary - and the interpretation of our legal system ...

Browney7

Pete_Cavan wrote: »

The standard in many developed world cities is for people to rent long term, even for ever. The obsession with owning property which exists here is not universal. In mature rental markets, most of the apartments are owned by large institutions the likes of which are now buying up whole developments here. These institutions either directly fund the construction themselves or buy from a developer who started the project using other sources of funding.

The situation in Ireland is actually moving towards what is the norm elsewhere. We have still retained aspects of our previous system which are not replicated elsewhere. Our standard 12 month leases need to be replaced with rolling contracts with specified break conditions. This gives the tenant more security that they won't just be turfed out, and also sets the rent at a level and doesn't get renegotiated each year. It is also better for the landlord to ensure continuity of lets, instead having a big turnover of tenants which results in one or more month of lost rent and potentially other costs too (letting, cleaning, etc.). The effective rent roll is less than the total monthly rent x 12 because of lost months and associated costs. Tenants in Ireland pay more each month to cover these costs.

In many places, apartments are let unfurnished and the tenant brings their own furniture, household items, etc. Standard elsewhereis for there to be shared clothes washing/drying facilities and tenants can buy their own if they want. Fitting out hundreds of apartments upfront is an additional cost here, plus then there is ongoing maintenance, replacement, etc. costs. It all gets passed onto the tenant here, and usually the quality is below the price being paid. Other countries have strong second hand furniture markets where people can get items at a good price if they don't want to buy new so can work to their own budget.

Basically, Ireland has adopted some but not all of the system which operates in other countries thus creating a hybrid system which the market has to adapt to while retaining many of our legacy issues.

All well and good but you'd need your head examined to pay 2k per month for a 2 bed apartment for the rest of your life considering the equivalent mortgage payment

monkeybutter

Pete_Cavan wrote: »

The standard in many developed world cities is for people to rent long term, even for ever. The obsession with owning property which exists here is not universal. In mature rental markets, most of the apartments are owned by large institutions the likes of which are now buying up whole developments here. These institutions either directly fund the construction themselves or buy from a developer who started the project using other sources of funding.

The situation in Ireland is actually moving towards what is the norm elsewhere. We have still retained aspects of our previous system which are not replicated elsewhere. Our standard 12 month leases need to be replaced with rolling contracts with specified break conditions. This gives the tenant more security that they won't just be turfed out, and also sets the rent at a level and doesn't get renegotiated each year. It is also better for the landlord to ensure continuity of lets, instead having a big turnover of tenants which results in one or more month of lost rent and potentially other costs too (letting, cleaning, etc.). The effective rent roll is less than the total monthly rent x 12 because of lost months and associated costs. Tenants in Ireland pay more each month to cover these costs.

In many places, apartments are let unfurnished and the tenant brings their own furniture, household items, etc. Standard elsewhereis for there to be shared clothes washing/drying facilities and tenants can buy their own if they want. Fitting out hundreds of apartments upfront is an additional cost here, plus then there is ongoing maintenance, replacement, etc. costs. It all gets passed onto the tenant here, and usually the quality is below the price being paid. Other countries have strong second hand furniture markets where people can get items at a good price if they don't want to buy new so can work to their own budget.

Basically, Ireland has adopted some but not all of the system which operates in other countries thus creating a hybrid system which the market has to adapt to while retaining many of our legacy issues.

None of that matters

It's all down to supply, rents are high because of it

With supply why would you turf people out if others aren't clammering to replace them

Someone mentioned Berlin, they had massive over supply of apartments and it was dirt cheap, as this has balanced out the price has gone up

People need to be realistic though

If you wait untill you have kids to buy when you need to rent a house to accom them you have missed the boat

You need to save from when you start working for this, you are competing with those who have or who have parents giving them a deposit

In the 1980s there were no jobs so massive immigration, worse than today, 25% deposits, massive interest rates

In 2000s the price of houses was higher than it is now 20 years later and you had negative equity to look forward to for the next 20 years

Worse than today too

1990s was the sweet spot if you were lucky to be the right age, but not normality

You just need to cut your cloth, if you can only afford to live in finglas, that's where you live

People laughed at the thought of the property ladder but this is it, people weren't doing it as a joke

0lddog

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!)

Crazy situation

Example of what you could have if you could remote work......


600/month for a 3 bed in a not bad area of the main business town in Tenerife.

https://www.fotocasa.es/es/alquiler/vivienda/santa-cruz-de-tenerife-capital/ascensor-amueblado/160099263/d?tti=3&xtor=EPR-482-[24x7_realtime]-20210519-[cardLink]-1@1

whisky_galore

jimmycrackcorm wrote: »

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.

Irish people want the bitta land for the trampoline and labrador.
Add to that bad experiences with shoddy Paddy-built apartments with only transient tenantry in mind.

Marcusm

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.

In the U.K., major apartment developments are financed by presenting huge numbers in Asia (HK, Sing principally) which effectively guarantees the Fiance needed to be raised. Hear apartments are then either flipped for profit at completion (as often happened in Ireland in the past) or are left empty post completion. Neither is a particular solution, especially given that Ireland would not have the same attraction.

Pete_Cavan

monkeybutter wrote: »

None of that matters

It's all down to supply, rents are high because of it

Part of the supply issue is the high cost of providing apartments. The reason supply is not catching up with demand is the high costs of owning apartments. This is not simply the cost of building the block now, its also the cost of owning, maintaining and managing the building and just about everything inside it for the next 30+ years.

The construction element is usually straightforward as the institution buys from a developer at a set price so once bought, that's that. In Ireland, the institution then needs to furnish every unit, maintain all of, eventually write it all off and then replace it all. That's an immediate extra cost passed on to Irish tenants who have no control over whether the quality matches the cost they have to pay.

That's just an example of how the institutional ownership model is being implemented differently in Ireland, therefore Ireland can't expect the same results as elsewhere. High turnover of tenancies is another, Irish tenants will have to pay the high rate of turnover (likely to pay the actual cost and then some) which is not the case in other countries. My point is we can't expect similar results to other countries when we are doing things differently.

FromADistance

Pete_Cavan wrote: »

Part of the supply issue is the high cost of providing apartments. The reason supply is not catching up with demand is the high costs of owning apartments. This is not simply the cost of building the block now, its also the cost of owning, maintaining and managing the building and just about everything inside it for the next 30+ years.

The construction element is usually straightforward as the institution buys from a developer at a set price so once bought, that's that. In Ireland, the institution then needs to furnish every unit, maintain all of, eventually write it all off and then replace it all. That's an immediate extra cost passed on to Irish tenants who have no control over whether the quality matches the cost they have to pay.

That's just an example of how the institutional ownership model is being implemented differently in Ireland, therefore Ireland can't expect the same results as elsewhere. High turnover of tenancies is another, Irish tenants will have to pay the high rate of turnover (likely to pay the actual cost and then some) which is not the case in other countries. My point is we can't expect similar results to other countries when we are doing things differently.

The high cost of apartments (& any type of housing) is determined by the cost of the inputs that make up that cost. I have already given the example, elsewhere on Boards, where the cost of land is overly inflated by the approval of planning permission for residential housing on agriculture land (in the example I discussed the cost increased by 400%). There is no appetite to tackle the high cost of land in this country.

There's also no appetite to regulate the cost of new builds on a phase by phase basis... in the Netherlands the cost per phase is exactly the same. I live in an estate where the cost of a 3 bed has increased from 300k to c385k over the course of 4 years (and for smaller houses at that). Tackle those issues and there maybe a chance of tackling the housing crisis in this country.

Geuze

FromADistance wrote: »

The high cost of apartments (& any type of housing) is determined by the cost of the inputs that make up that cost. I have already given the example, elsewhere on Boards, where the cost of land is overly inflated by the approval of planning permission for residential housing on agriculture land (in the example I discussed the cost increased by 400%). There is no appetite to tackle the high cost of land in this country.

+1000%%%%

Dav010

Geuze wrote: »

+1000%%%%

How are they supposed to tackle the price of a privately owned commodity?

antoinolachtnai

Dav010 wrote: »

How are they supposed to tackle the price of a privately owned commodity?

You could tackle it by strategically releasing state land.

But this is not something that can be done quickly. You have to plan five years ahead. If you can’t wait five years, then you need some other approach.

Dav010

antoinolachtnai wrote: »

You could tackle it by strategically releasing state land.

But this is not something that can be done quickly. You have to plan five years ahead. If you can’t wait five years, then you need some other approach.

It isn’t as simple as releasing state land. The sites would be subject to the same planning laws as everyone else and the market will set the price unless the Government developes the land, which they won’t. When the houses are built, there is no guarantee that developers will not strive to maximise profits by selling at the current market rate.

Land, though important, is only one part of many which contribute to property prices.

Yellow_Fern

New apartments in Germany cities tend to be rentals. The ones that are sold, tend to pricey. The difference is they have a vast stock of old apartments with their prices kept low by rent controls, and they also have a much slower growing population.

HBC08

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.

I don't necessarily disagree with you but doesn't that all sound a bit like the "you need to get on the property ladder" speil that was being bandied about 20 years ago.

Geuze

Dav010 wrote: »

How are they supposed to tackle the price of a privately owned commodity?

One solution: only rezone land from agri to residential after it is in public ownership.

(this won't really help in city centres)

Dav010

Geuze wrote: »

One solution: only rezone land from agri to residential after it is in public ownership.

(this won't really help in city centres)

But the Government will not enter into large scale development, and even if they did, it would be private contractors doing the building which would drive costs up ala the children’s hospital/schools/roads leading to high unit prices, or huge loses to the exchequer.

If you sell public lands to private developers, they still need planning, same as everyone else, and no developer will speculate on large scale construction if the selling price of houses is capped at the end, so if public land is sold for private development, the market will set the price for the house, and given demand, that will be high. Furthermore, if prices fall due to over supply, developers will not build if profit drops or there is a risk that they will be left with large numbers of unsold units.

As I said, land price is only one of many considerations in cost/price of new residential property and even if a developer buys site low, there is unlikely to be anything to stop the units from being sold high if there is demand.

Wanderer78

Dav010 wrote:

If you sell public lands to private developers, they still need planning, same as everyone else, and no developer will speculate on large scale construction if the selling price of houses is capped at the end, so if public land is sold for private development, the market will set the price for the house, and given demand, that will be high.

Maintaining the land in public ownership may reduce speculation of that land, if a price is agreed between the state and private developers, it should be adhered to, the hospital is obviously a scam, you can be damn sure many knew it was never gonna be done at the price agreed. By not building, it's already costing us, so we better get cracking.....

Dav010

Wanderer78 wrote: »

Maintaining the land in public ownership may reduce speculation of that land, if a price is agreed between the state and private developers, it should be adhered to, the hospital is obviously a scam, you can be damn sure many knew it was never gonna be done at the price agreed. By not building, it's already costing us, so we better get cracking.....

Should, but will not. Building materials costs have increased 30% this year. No developer will agree a contract without contingency for increases in costs.

Wanderer78

Dav010 wrote:

Should, but will not. Building materials costs have increased 30% this year. No developer will agree a contract without contingency for increases in costs.

To be fair to developers, this should also be done, they do need to make money after all, but at the current rate, nothing will be done

Wanderer78

Could the state take control of purchasing materials, what would be the pitfalls of such an approach?

Dav010

Wanderer78 wrote: »

Could the state take control of purchasing materials, what would be the pitfalls of such an approach?

I would think developers would think all their Christmas came at once if they did, but can you imagine the delays if Government controlled purchasing? Delays mean increased costs, which builders would have contingency for extra charges.

Mike Murdock

hmmm wrote: »

There seems to be straitjackets every way the developer moves. Too many requirements, too much change in regulations.

If it was me I'd remove all requirements except basic safety/fire requirements. I lived in a dark 50 square metres apartment when I first left home and loved it - I hated the idea of sharing a house. If developers want to build blocks with people packed in let them, and people will decide if they want to rent/buy them or not.

The quality might not be great at first for those who want bigger apartments, but over time as the supply problem is solved things will improve and the developers will be forced to build to meet market requirements. If we keep insisting that every apartment has to be suitable for a family and their pony we'll be forever wondering why none are being built.

Do that, and that's all those ****ers will build.

People here making out that Developers are "victims" or "hard done by". History has shown that they are nothing of the kind. Just look at what one of the biggest developers in the country did at Longboat Key.

They need to be regulated up the ass to make sure that **** doesn't happen.

Pete_Cavan

Land really isn't an issue as there are lots of sites with planning approval for significant numbers of units (look at all the SHDs, all of which are >100 units). If all approvals were built, it would go a long way to addressing the supply shortage, if not eliminate it entirely. The high cost of land should actually be ensuring that sites are developed as there is huge capital tied up in sites which gives no return unless the owner develops the site or sells it.

The ability to site on sites is the biggest issue, it should be punitively expensive for sites with planning approval to not be developed. Either the current owner develops it or sells to someone who will. The negotiating position of the owner when selling immediately changes if there are negative consequences for them to holding out for a stupid price. Instead of them deciding the price, the market will decide and if the owner won't accept market price, they can develop it themselves or pay taxes and levies on the undeveloped land.

The current vacant site charge isn't enough, too easy for people to get around it. A full Land Value Tax system would be great because it means nobody can avoid it. A well developed system should replace the existing LPT which is not fit for purpose. If sitting on an undeveloped site for years was costing money every year, you'd quickly see a lot of sites going up for sale and it would be a buyers market.

Mike Murdock

Pete_Cavan wrote: »

Land really isn't an issue as there are lots of sites with planning approval for significant numbers of units (look at all the SHDs, all of which are >100 units). If all approvals were built, it would go a long way to addressing the supply shortage, if not eliminate it entirely. The high cost of land should actually be ensuring that sites are developed as there is huge capital tied up in sites which gives no return unless the owner develops the site or sells it.

The ability to site on sites is the biggest issue, it should be punitively expensive for sites with planning approval to not be developed. Either the current owner develops it or sells to someone who will. The negotiating position of the owner when selling immediately changes if there are negative consequences for them to holding out for a stupid price. Instead of them deciding the price, the market will decide and if the owner won't accept market price, they can develop it themselves or pay taxes and levies on the undeveloped land.

The current vacant site charge isn't enough, too easy for people to get around it. A full Land Value Tax system would be great because it means nobody can avoid it. A well developed system should replace the existing LPT which is not fit for purpose. If sitting on an undeveloped site for years was costing money every year, you'd quickly see a lot of sites going up for sale and it would be a buyers market.

You need to make it impossible for land hoarders like The Bailey Brothers to exist without them paying massive fines for non-commercial use of land. And I'm not talking having a few horses running around a large tract of land like they used to have out in North County Dublin.

Darc19

Looks like some people believe the construction industry's propaganda.

1. Banks will lend to builders for apartment construction and so will many non bank lenders. Maybe 5 years ago it was different.

2. Cost of construction is no where near what they say. It's a classic trick they play. They calculate headline contractor and materials costs and there you go. But they will have in-house engineers, design teams and legal teams. They will get discounts and rebates off materials. But they don't calculate this.


Take 30%+++ off their figures

Mike Murdock

Darc19 wrote: »

Looks like some people believe the construction industry's propaganda.

1. Banks will lend to builders for apartment construction and so will many non bank lenders. Maybe 5 years ago it was different.

2. Cost of construction is no where near what they say. It's a classic trick they play. They calculate headline contractor and materials costs and there you go. But they will have in-house engineers, design teams and legal teams. They will get discounts and rebates off materials. But they don't calculate this.


Take 30%+++ off their figures

Pretty much what I heard from someone I know that works in the industry. They're inflating their costs by 30-40% to play the poor mouth.

Wanderer78

Dav010 wrote: »

I would think developers would think all their Christmas came at once if they did, but can you imagine the delays if Government controlled purchasing? Delays mean increased costs, which builders would have contingency for extra charges.

yea i was thinking that alright, we have to come up with solutions, and fast

PCeeeee

Pete_Cavan wrote: »

The standard in many developed world cities is for people to rent long term, even for ever. The obsession with owning property which exists here is not universal.

Sorry to pick on one point from a larger but Ireland has approximately the same home ownership rates as our European peers and decidedly lower than many.

Now I do note you said cities above so you're probably correct but I think its worth pointing out actual home ownership rates.


https://www.statista.com/statistics/246355/home-ownership-rate-in-europe/

https://en.m.wikipedia.org/wiki/List_of_countries_by_home_ownership_rate