A major new report has found that the cost of delivering a two-bedroom, low-rise apartment in the Greater Dublin Area is €293K ex VAT.
The report by the Society of Chartered Surveyors Ireland found that the cost to deliver medium rise (5-8 storey) apartments in the city ranged from a low of €470K to €578K at the higher end.
‘The Real Costs of New Apartment Delivery’ report also found that the actual cost of building the apartment – known as hard costs – made up 43% or less than half of the overall costs. ‘Soft costs’ such as VAT, levies, margins and fees make up 41% of the costs, while site costs accounted for 16% of the total.
The report strongly indicates that it is not commercially viable to deliver affordable medium rise apartments in Dublin. Paul Mitchell, Chair of the SCSI working group that authored the report, said the research showed that contrary to popular perception apartments are expensive to build.
According to the report, the sales price of two-bed apartments in Dublin across all three categories currently range from €338K to €361K to €383K. Based on the Central Bank lending rules of a Loan to Value of 90% and Loan to Income cap of 3.5 times salary, a first-time buyer couple would require a deposit ranging from €34K to €50K and a combined salary range of €87K to €129K to afford these.
However, a couple on the average salary of €45K and combined salary of €90K with a deposit of €34K would only be able to meet the mortgage requirements for a low rise suburban apartment priced at €338K.
According to the most recent CSO figures, only the top 20% of households are earning over €80,000 per annum.
The report also found that the only apartment that is commercially viable to deliver at affordable levels is this low rise suburban type. It says the viability gap for higher end, low rise suburban type apartments is €38K and that this widens to €137K for upper end medium rise apartments in the city.
Commenting on the report, Chair of the SCSI, Paul Mitchell said, "Some people might have thought that building large numbers of apartment schemes – as opposed to building houses - might provide a more cost and time efficient solution to our current supply crisis. However, our report shows that costs can vary from €293K for a low rise suburban apartment – which is the one most similar to the average 3 bed semi – to €578K for a medium rise apartment in the city. While prices can vary significantly depending on design one of the key variables was site costs. In our report site costs vary from €33K per apartment to €125K and this highlights the paucity of serviced land."
He added, "Another popular perception is that the supply situation can be alleviated by building upwards. However, as we can see in this report the most expensive apartments are the medium rise ones in the city. Our research shows the higher you go the greater the costs. This is due to the fact that these buildings have a more complex structure and require a wider range of mechanical and electrical services, sophisticated facades, basement parking and much more."
Source: www.businessworld.ie
