There’s an interesting comment posted under an Irish Times opinion piece by John McManus that, if true, would help me understand why builders aren’t building and why we are not in a bubble. My question is… is this true? The comment is
Surely you could have used the same argument to ‘prove’ that we didn’t have a bubble at any given point during the Celtic Tiger years too. If you include current site cost of course you can make an argument that properties are selling for at or under replacement costs but the bubble premium is built into the notional site cost so the whole argument is circular and meaningless.
Replacement costs don’t include the cost of the site, assuming it’s for insurance purposes as you already own it!
Anyone who snapped up sites at the bottom could make a good profit now it they built, but I expect they’re waiting for the market to rise further first.
Where do those replacement costs come from (apart from a comment on IT website). I thought to google, and came up with this: scsi.ie/about_us/rebuildcalculator
Which gives far lower rates (e.g. 120m2 4 bed detached in dublin at €213k).
Exactly. The price of residential land is driven by what people will pay for houses on it, not the other way round.
It does raise some interesting questions about what people will pay more for stuff built to current regs, whether the extra architects fees will actually produce measurable improvements in build quality, and whether the additional supervisory effort on new builds is a simple net plus or will generate savings elsewhere.
I remember some interesting conversations with the foreman on my tiger built house about whether head-sized holes in the walls were acceptable at “snagging” stage.
I’d certainly pay substantially more for a 2014 house than a 2004 house, all other things being equal. New building in any quantity has to depress prices (relatively) of old, fugly, cold houses with no “period” appeal, although the tradeoff always seems to be site size. There’s a fixed amount of money to be scattered around the housing market so rises in one part (new builds) ought to constrain prices of other stock.
Is there a similar stand off between landowners and builders as there is a perceived stand-off between owners and buyers?
But the Cost of Building a House to a Developer excluding Site Costs is approximately €100 per Foot². Zoned Building Land is being hoarded. We create artificial scarcity by zoning building land. Why keep making Dublin Bigger?
Why not start a new City well above sea level? A new City with /energy efficient Buildings and sustainable Transport. A linear City along the M3 Motorway.
I love these airy fairy build costs that are used to justify sky high costs.
If you want to find out what “real” build costs are, ask a builder what it cost to build his own house and you’ll notice an enormous gap between that cost and the cost to build a much lower spec house for somebody else.
Plus, 20% in professional fees sounds very high when you’re talking about cookie cutter housing estates. I’m not sure but I’d be amazed if any Irish builder pays that out to architects/engineers/solicitors.
I am curious what do pinsters think are the costs to build a housing estate (100 x 1200 sq ft semi D to allow for economies of scale) in Dublin?
Build costs to current Dublin building regulations and labour rates (nothing fancy basic fittings)
Professional fees (planning permission)
Professional fees (building supervision)
Ground works, roads, provision of electric, sewerage, telephone, cable, etc
Social and affordable housing provision
Legals for land purchase and sub division of site
Legals for selling the properties
Fit out of show house
Marketing and advertising costs
Estate agent fees
Plus VAT on all the above @ 13.5%
How many houses in the development?
Many of your costs become pretty trivial once you’re building anything of scale (e.g. professional fees for the planning permission: I don’t know what they are for a housing estate, but I do know what they are for much more contentious projects going to ABP with oral hearing and impinging on SACs, which I would confidently take as an upper bound on the costs associated with a residential development).
Also, profit margin for the developer is not a cost.
You can look up accounts of large contractors to understand margins in construction at least (say Sisk, BAM, etc). Nothing like 20%. Generally very competitive tendering and far from guaranteed at outset that the contractor makes money on job unless they are very diligent on cost control and claims management.