Had a builder quote me for a job in Dublin that he had previously done for a friend in Wexford. It was a third more expensive. Ie 100k to 150k. I queried this and his response was that people have more money in Dublin! He was actually serious and couldn’t see anything wrong with this…
That’s a half more expensive!
Price discrimination is normal in many markets - ie, charging more for the same product to customers with a higher willingness to pay - but I can’t see a builder getting away with charging 50% more just because and not being undercut by competitors.
Dublin is somewhat more expensive than the rest of Ireland, but not the way Paris or London are to the rest of France and England.
If you’re sitting round the table at the Department of Finance (and thus barely numerate and probably cross eyed ) it makes perfect sense
- the State sold a lot of property at below cost of construction to foreigners as Nama unwound
- to balance the ‘other side’ of the equation the State must now buy property at above the cost of construction
The state would be working against its aims if it bought too cheaply
This website claims that for a house price of €236k… €76k is taxes. Is that true?
**Typical Irish home build costs
Per Unit: Amount:
Site Cost €50k
Build Cost @ €100 psf, Size Average 1,100 = €110k
Roads & Infrastructure €15k
Utility Connections €2k
Legal Fees on Acquisition and Disposal, Marketing, Estate Agency Fees. €6k
Architects, Quantity Surveyors, Consultants, Homebond and Stamp Duty. €2,500
Part V Contributions to social housing €5k
Council Levies ~€10k
Cost of Finance €7,500
Total Costs €208k, VAT @ 13.5% €28k
Sale Price €236k (equivalent French starter home €160,000)**
The above costs refer to the construction of semi detached units with a density of 8 -10 per acre. We need to move away from considering that crud as being a sustainable form of housing. It isn’t.
Victorian and Period housing was typically 30-35 units per acre and the Garden City designs of the 20th Century typically had 20-25 per acre. Higher density produces perfectly desirable housing.
If the State grants a fixed contract to a builder to build 1000 units then the profit margin could be reduced from 17.5% to less than 5%. The economy of scale would hugely reduce the construction costs, material costs, infrastructure provision costs etc. The State already owns the land (or could acquire it for 10k per acre), but this shouldn’t be an excuse for constructing masses of ugly sprawl. For social and affordable housing we should be aiming at 30 units per acre, terraced housing (750-800sq ft), mid rise apartments, mixed in with work/live units, larger multi generation units that encourage families to care for elderly family at home and in their community.
There is no shortage of urban design examples from around the world to show how to create desirable housing in healthy communities with good facilities and good prospects. All it takes is a bit of vision.
Affordable housing can easily be provided for €90k per unit including all costs (site, infrastructure contribution etc).
If you’re building a simple apartment block where you’re dropping in prefabricated bathrooms etc. then you can probably hit sub 100k levels.
If you’re building terraced or semi-detached style properties then it’s not possible.
It takes 9-12 months from groundworks to handing over keys for a terraced house, for a cost of 90k with a modest 5k profit, 50k of material, labour would need to be 35k - that’s unrealistically low with Irish wage costs and for the number of people and time required.
Also social housing when handed over is expected to have flooring, bathrooms, kitchens fitted, so could have taken more labour than a standard builders finish house.
I can assure you that €90k for 750-800 sqft terraced housing fully finished is easily possible. I build houses and I’m aware of the costs involved.
Ah, but do you build them to current standards?
Ps - does your 90k figure include costs for access roads, electricity and gas connections, vat, development levies, professional fees and finance costs?
And finally, how many houses have you delivered for €90k in the last 36 months?
What are the economies of scale in construction? You get (I guess) a bit of savings on procurement. But you cannot really speed up the process of laying blocks, or pouring concrete or plumbing.
For the rest, particularly going for bigger densities, I fully agree.
Bit of a stupid question. Why wouldn’t I be building to the current standards? If you understand the process of building a house perhaps you could explain why I would be building sub-standard housing. For your information I’ve been building passive standard houses that far exceed the current standards for the simple reason that’s what my clients want and that’s what I specialise in.
Cost of access roads depends on the size of the site so how long is a piece of string?, but yes access roads, drainage, footpaths, landscaping included. Social and Affordable housing is exempt from development levies, but I have allowed 3k per unit towards associated costs. If the State was building 1000 houses then the professional fees could be kept in house and minimised. The contractors professional fees (engineers, surveyors, etc included in the amount). The State would also cover the cost of finance because it can avail of by far the lowest rate. Why would the State allow itself to be charged 10% on money it can get for 1%? VAT included in the figure.
Most of my projects are 2000sqft+ because the only people building houses are people with access to money. That’s one facet of the problem. The only way to address it is for the State to step in and build houses.
If the State took half of the €500 million per year it gives to landlords to inflate their rents and instead used it to finance an affordable house building program it could build 50,000 units (€5-6 Billion investment). Half of these units could be immediately rented for €4-5k per annum and that would relieve the pressure on rents right across the housing market, saving the State hundreds of millions of euros that would other wise be given to landlords. The State could use the rent roll from the properties to finance the maintenance of the units, while also selling the remaining 25k units to recoup their cost and allow the creation of a further investment round for the next 50,000 units. By lowering the cost of living it would allow the creation of household wealth and feed back into the economy.
The savings on building multiple units are right across the board, but very much so on labour. It’s amazing to watch how subcontractors figure out exactly how to maximise their productivity on a large site. As an example it wouldn’t be unusual for a pair of electricians to first fix 3 apartments in a day. The same electricians could easily spend 2 days on a single house because it would be more complex. When they are familiar with the layout they fly through the work. Of course it’s not a linear trend and at a certain scale of project the savings can’t be improved on.
Fascinating posts Coles.
If anyone is interested in examining the figures and spec for construction I’d be happy enough to post it up and discuss it, but I’m not really interested in it becoming a flaming exercise.
Not really given the quality of homes built during the Celtic Tiger era - Why should you be any different to any of the other builders from that time period
As somebody who also has a bit of knowledge - 3k per unit appears unreasonable
Perhaps you could give rough costing for a the following in a 50 unit estate
ESB connections and the cost of a sub station
Sewerage connections (foul and ground water piping)
Estate Roads that the council would be willing to take in charge
Ah yes, the mythical site of 1000 houses with little need for professional oversight - I am confident that the failings from the CT era were a result of a lack of oversight - Least we forget poor quality is usually the result of poor workmanship.
However lets stay on track - Do you accept that any private developer/builder will need to factor finance costs into his equations?
Zero houses built for the price quoted - but you believe less oversight will result in better built quality
Are these the same electricians who were first fixing three apartments a day during the CT era - How did that work out?
Why doesn’t the State just rent out its stock to the highest bidder for each unit ? I’m sure there are units being rented at way below market value. Use the profit to build or buy more units. Get more working people and non welfare recipients into council housing schemes.
Perhaps the State isn’t capable of efficiently running such a scheme ?
Yes, I would be very happy to examine your costings - IMO 79.3k plus vat is an unreal expectation to build a 3 bed semi in today’s environment
The state does an excellent job in many areas - I am just unfamiliar with any of them
I do think that even if it were theoretically possible to build houses at a reasonable cost, nobody would manage it in practice. A public enterprise would run thirty years and 10,000% over budget. Private developers would fling together some shoddy ruin that would be discovered five years down the road to have foundations made of recycled toilet paper. I’d be happy to have Coles2 as housing czar but he’d have to also design some sort of ball-breaking inspection scheme along with legislation that allowed time-wasters and profiteers to be summarily executed by hanging from their own lampposts.