Thursday 29 September 2016

Construction accounts for less than half the cost of building a house

Published 19/05/2016 | 02:30

Housing Minister Simon Coveney Photo: Tom Burke

Less than half of the cost of building a house is accounted for by construction costs.

  • Go To

New research by the Society of Chartered Surveyors also found the overall cost of building a new house is €45,000 higher than the asking price of a typical home in greater Dublin.

The surveyors looked at the cost of building a three-bed, semi-detached home in the greater Dublin area.

They found that it costs €330,000 to build such a house, putting it well out of the price range of an average couple.

There is a need for costs to be reduced to bring them into line with what people can afford.

Construction costs come to €150,000, amounting to less than half (45pc) of the total cost of building the house.

The rest was made up of land costs, valued added tax, the profit margin and funding costs.

Michael Mahon of the Society of Chartered Surveyors Ireland (SCSI) said there was need to tackle the high cost of building.

The society recommended:

• Reducing the VAT rate from 13.5pc to 9pc. This would knock €13,000 off the cost of building a home.

• Providing a State-supported development bank to lower the cost of funding home construction. This could save €12,000 from the cost of constructing the average home.

• Reducing development levies from an average of €8,500 per unit to €1,500. This would knock €7,000 off the cost of building each unit.

• Forcing local authorities to free up zoned land for development.

• Conducting a cost-benefit analysis of new building regulations.

After the construction costs, the remaining €180,000 consists mainly of land and acquisition costs of €57,000 (17pc of total), VAT of €39,000 (12pc) and a profit margin of €38,000 (11pc).

Mr Mahon described the fact that the so-called soft costs - those other than the actual construction costs - dominate the total cost was something new Housing Minister Simon Coveney urgently needs to address.

"The country is experiencing a chronic housing shortage, which is contributing significantly to the current homelessness crisis," he said.

"The findings of this report highlight a number of pressing issues, particularly on the soft cost side.

"We need to kick-start housing supply as soon as possible and to accelerate from the current output of 12,000 units per annum to 25,000 units."

The report, entitled 'The Real Cost of New House Delivery', is based on a study of eight house-building projects in the greater Dublin area, each containing a minimum of 30 units.

It found that the cost of building a new house in the capital is €45,000 more than the median asking price of a three bedroom, semi-detached house in greater Dublin.

SCSI also surveyed a couple, both of whom earn the average industrial wage of €37,000, and found they would be unable to afford the cost of a new house, even after drawing a maximum loan amount.

If they were to buy a three-bedroom semi, priced at €285,000, they would require a deposit of €35,000.

The report said that other soft costs add to the final bill. These include levies, professional fees and sales and marketing costs. When a profit margin of €38,000 (11pc) was added, the total cost of building came to €330,000.

Irish Independent

Read More

Promoted articles

Editors Choice

Also in Business