Friday 20 July 2018

Warning Irish Water plans to see new price hikes will be passed to home buyers

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Fearghal O'Connor Deputy Business Editor

A proposal by Irish Water to change the way it charges for connecting homes to its network will push up the cost of new homes by thousands of euro and could further hit the supply of housing, new data indicates.

Connection costs will rise by an average of 109pc if the water utility can push through its plans, according to an analysis of current and proposed charges seen by this newspaper. The analysis by industry experts is at odds with Irish Water claims that costs will fall in most areas.

Anthony Neville, chairman of the Irish Homebuilders Association, said that in his own case he had calculated the move would add close to €5,000 to the cost of houses his firm is building in Dublin.

"My contribution is going to go up by €5,000. There is no nice way I can say this, that is going to add €5,000 on to the house price for first-time buyers. There is no room to absorb that anywhere because my margins are so tight the banks could just decide to cut my funds due to something like this. It is these seemingly small additions that are killing us and stopping purchasers from being able to afford our product," he said.

Neville said it appeared to be a case of the water charges debate "coming home to roost". "We all should be paying for our water, not just first-time buyers. Why should first-time buyers and commercial users of water have to pay for everyone else. How is that just?"

Irish Water is expected to connect 51,000 customers to the water network with an expected revenue value of €315m between 2017 and 2021. It plans to bring in one nationwide standard charge across every local authority area of €5,636 per house, a substantial rise in many areas, according to the analysis.

It shows the cost of connections would fall in seven counties but would rise everywhere else and by well over €3,000 a home in many others.

Connection costs will rise sharply in all the Dublin local authority areas apart from Dublin City Council, with rises, too, in Cork, Limerick and Waterford.

Construction industry sources also claimed that, under the proposals, builders would be forced to pay water connection fees upfront for entire sites rather than for each phase of a development. This, claimed sources, could see Irish Water demand upfront payment of €560,000 for a site with capacity for 100 homes — even if much fewer homes are initially planned. In response, Irish Water said its new policy will support phasing of developments to “enable developers to take a phased build approach where they would submit and pay for connection applications in phases depending on the number of units that they are proposing to build at that time. 

“This enables the developer to align their cash flow with the building and sale of housing units,” it said. But Neville said that were massive concerns about the proposed changes in the sector.

“It will have a big impact on the houses we are building in Saggart at the moment and they will  increase in price,” he said. His company has calculated that its contributions towards utilities and services would go up by 57pc on the two bedroom homes it is planning to sell for between €245,000 and €260,000.

“I don’t have any room to absorb a 57pc increase in local authority contributions on top of Vat and everything else. Already 36pc of a house price goes back to the state,” he said.

In its response, Irish Water said that there are 57 different charging regimes across the 31 local authorities, with different methods for calculating connection charges. It claimed that a new combined water and wastewater charge would lower prices in 53 of the 57 charging regimes.

“Irish Water is proposing a single set of connection charges for all customers,” it said. “All properties that require the same type of connection will pay the same standard connection charge. The reason that Irish Water is proposing this single charge is because each connection, whether it is for a one-off house or a house within a development, has the same impact on the water and wastewater network. This will also bring simplicity, clarity and transparency to customers in understanding their connection costs.”

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