Tuesday 23 May 2017

'Pain will only get worse' for house buyers as developers hoarding land

Claire Solon Picture: Fennell Photography
Claire Solon Picture: Fennell Photography
Paul Melia

Paul Melia

Developers are hoarding land with planning permission in place for new homes, in the expectation that rising prices will boost profits.

The Irish Planning Institute's annual conference has heard there was a "huge incentive" to landbank in the midst of a housing crisis.

President of the Society of Chartered Surveyors Ireland Claire Solon also warned that "the pain will only get worse" for those hoping to buy as costs and prices rise. She said that just 45pc of the cost of building a three-bed semi-detached home in Dublin was made up of bricks and mortar.

An analysis of homes constructed across 10 sites found that each cost an average of €330,000, with land costs accounting for between €10,000 and €70,000 per unit. The remainder covered financing costs, fees, levies, VAT and a profit for the builder.

She also warned that prices were rising, particularly after the introduction of the 'Help-to-Buy' scheme.

"We have seen a strong upwards pressure in terms of costs. There's a number of skilled worker shortages. The lead-in time for materials is elongated," she said.

"The regulations have changed since the last boom, and all of these things added upward pressure.

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"We think there needs to be a cost-benefit analysis completed on new regulations, to see what the cost of these standards is and the benefit.

"We do see landbanking. Large developers are banking land. It's a huge incentive to wait and delay while house prices are rising. The pain is only going to get worse for people hoping to buy."

She added that in some cases, local authorities and Nama were not developing key sites, and that development land embroiled in loan disputes was also lying idle.

The conference also heard that local authorities should be able to acquire unused or vacant development land for a reduced cost under streamlined compulsory order powers.

President of the Irish Planning Institute Deirdre Fallon said the planning and development system needed to refocus on the needs of communities, and a site value tax - as opposed to a property tax - should be introduced, with funds to be spent locally.

In cases where strategic landbanks were lying idle, city and county councils should be free to purchase them at a reduced rate, she said.

Among other issues highlighted at the conference were the difficulties in securing bank finance for new housing. Main banks generally only loaned 60pc of the development cost, even for builders with a strong track record.

Planning consultant Tom Phillips also criticised the planning system for taking too long to reach decisions. He said where applications for housing were incorrectly deemed by a council not to have been properly submitted, it cost clients tens of thousands of euro in financing costs arising from unnecessary delays.

Housing Minister Simon Coveney will address the conference this morning.

Irish Independent

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