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Build costs running €25,000 ahead of house affordability

Land, Vat and builders' margins put 3-bed semi out of reach

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'Hard construction' costs including materials and labour make up less than half the overall cost of a new house. That figure is then inflated by land prices, builder's margin and Vat, according to a major study by the Society of Chartered Surveyors (stock image)

'Hard construction' costs including materials and labour make up less than half the overall cost of a new house. That figure is then inflated by land prices, builder's margin and Vat, according to a major study by the Society of Chartered Surveyors (stock image)

'Hard construction' costs including materials and labour make up less than half the overall cost of a new house. That figure is then inflated by land prices, builder's margin and Vat, according to a major study by the Society of Chartered Surveyors (stock image)

Rising construction costs have added €41,000 to the bill to deliver a 3-bed semi- detached house in greater Dublin in the past four years, widening the gap between build cost and affordability.

'Hard construction' costs including materials and labour make up less than half the overall cost of a new house. That figure is then inflated by land prices, builder's margin and Vat, according to a major study by the Society of Chartered Surveyors (SCSI).

'The Real Cost of New Housing Delivery 2020' - which is based on a detailed study of 30 live sites in the greater Dublin area - found 'hard costs' worked out at 48pc of the overall cost of providing a new house.

Costs are rising more sharply on the 'hard construction' side, including greater costs of site development works including water infrastructure and landscaping as well as the impact of new regulations which can slow delivery, according to builders surveyed. Wages and construction materials are also getting more expensive.

Incoming President of the SCSI Micheál Mahon said the current model will not deliver the volume of homes we need - between 30,000 and 35,000 a year - because developers cannot deliver homes at a price buyers can afford.

"The housing crisis will not be resolved until the balance between affordability for consumers and viability for developers is addressed," he said.

"There is a major affordability gap for first time buyers trying to purchase a home in line with Central Bank of Ireland regulations and this gap raises serious questions over the viability of new house building."

He called for the establishment of a Commission on Housing to review elements of the overall bill, including the tax treatment of new housing, the cost of public procurement and regulation. He also backed the need for a large-scale public sector house-building programme.

In their latest cost-of-housing report, surveyors found the average cost of building a 3-bed semi in the greater Dublin area is now €371,000. That includes land at €61,000, Vat of €44,000 and a developer's margin of €44,000 or 12pc.

The high cost of housing delivery leaves a gap or shortfall of €25,000 between what a couple with a combined income of €88,000 a year can pay and the cost of building a new 3-bed semi in greater Dublin, it said.

Based on average asking prices in the capital the shortfall is even bigger, the Surveyors found.

The cost of delivering social housing is significantly lower at between €210,000 and €230,000, the survey found.

Housing shortages, lack of affordability and the slow pace of construction have prompted ongoing calls to break the impasse.

Irish Independent