The cost of building a house in Ireland. - Godfrey Grant Property Consultants

Home The cost of building a house in Ireland. - Godfrey Grant Property Consultants
By hdadmin On 29-04-2015

The cost of housing is a topic which will rarely evade the media for a week or two. Everyone has their own point of view. However, by and large most share a common belief that housing in this country is too expensive.

So how much does it really cost to build a house in Ireland?

Therefore, for the purposes of this article we are going to take an average three bedroom semi-detached house in one of the commuter towns of Dublin; lets say Navan or Newbridge, Ashbourne or Arklow. How many people have actually taken the time to sit down and calculate all the expenses involved in building a new three bedroom semi-detached unit of circa 1,100 sq ft.

In order to ensure we cover all the expenses involved we will go through the development process from acquisition of site right through to disposal of unit.

Sites in satellite towns of Dublin are priced anywhere between €40k-€80k, we will take a cost of €50,000 per site. Incurred in this cost is the amount it cost to change the land from agriculture to residential zoned land and from zoned residential to being granted planning permission for the development. Accordingly, acquiring development land will incur a cost of 2% Stamp Duty of the acquisition price together with legal fees. The developer having acquired the land (or pre acquisition) will incur costs on Architects fees, Quantity Surveyor fees, Homebond, Consultants and Contingency expenses all of which will cost a developer on a medium to large scale development a further €2,500 per unit.

Let’s start the building process:

Our three bedroom house has a total floor area of circa 1,100 sq ft. The build cost for this is in the region of €95-€105 per square foot. Since the introduction of the new Building Regulations 2015, building costs have increased while also causing delays on commencement. A price of €100 per sq ft will produce a unit with an average finish, but which will appeal to a young family or first time buyer. The developer has to factor in costs relating to roads and infrastructure which varies from site to site and development to development but which will often cost in the region of €15,000 per house/unit. ESB, Gas and water connections will set a developer back a further €2,000 per house. On top of this a developer is obliged to discharge Part V contributions, which will either take the form of setting aside a portion of land, or making available a number of units or paying their way out of this requirement. This can be an extremely onerous cost on developers, a cost which is ultimately borne by the buyer of the individual units. In recent years, as a result of a lack of supply of housing, developers have been able to negotiate with the local councils lower contributions in the region of €5,000 per house.

The last remaining costs which have to be factored into account are the disposal fees which cover show house expenses, marketing fees, estate agency fees and legal fees. Typically all in all they will account for roughly 2.5% of sale prices.

Finally, we have to allow for the cost of financing which in today’s climate is extremely hard to source and secure. On an attractive loan from one of our pillar banks and based on the above build cost and figures with a build and disposal time of between 9-12 months a cost of finance per unit would be in the region of €7,500. This figure dramatically increases if a developer has to source private funding through second or third tier institutions which is often the case.

 So let’s crunch the numbers;

Per Unit: Amount:
Site Cost €  50,000
Build Cost @ €100 psf, Size Average 1,100 €110,000
Roads & Infrastructure €  15,000
Utility Connections €    2,000
Legal Fees on Acquisition and Disposal, Marketing, Estate Agency Fees. €    6,000
Architects, Quantity Surveyors, Consultants, Homebond and Stamp Duty. €    2,500
Part V Contributions €    5,000
Council Levies €  10,000
Cost of Finance €    7,500
Total Costs €208,000
Sale Price €236,080
VAT @ 13.5% €  28,080
Net Sales €208,000

If the developer was a not-for-profit organisation he could sell houses at €236k to break even. However, the simple reality is developers are looking for minimum returns in the region of 15-20% of net sales. Any figure less than this will raise concerns as to whether the risk of completing a development justifies the expected return.

A median return of 17.5% on net sales would mean a developer would look for a profit of €36,400 per unit, with VAT at 13.5% this would add an additional €41,400 per unit meaning a developer would be very reluctant to commence a new construction project in Newbridge if he did not believe a new three bedroom semi-detached would attract a price of €277,500 at the initial launch.

As you move inwards towards Dublin site acquisition prices increase so that by the time you hit Naas, Bray or Swords prices per site will range between €75k-€100k this increases to between €125k-€175k per site in locations such as Rathfarnham, Tempelogue, Glasnevin etc. The affect this has on prices is that a developer will need to sell a three bed semi at €385K to break even or €450k to achieve his target return.

The majority of new builds are purchased by first time buyers. Under the new Central Bank regulations in order for a first time buyer to acquire a new three bedroom semi-detached house in Tempelogue they will require a deposit of 10% of €220k (€22k) + 20% of the balance of €230k (€46k) a total deposit of €68k. This will leave a funding requirement of €382k divided by 3.5 times annual income meaning a first time couple between them would need to be earning circa €110k or €55k each in order to be considered for loan approval.

Written by Rory McEntee

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