Wednesday 24 January 2018

'Builders won't get funding unless they make money. You have to be a bit greedy about that'

As the newly-elected president of the SCSI, Claire Solon is anxious Ireland avoids the mistakes made during the boom, but equally she is prepared to defend the right of builders to make a profit on the houses they build, she tells Ronald Quinlan

Claire Solon, President, Society of Chartered Surveyors
Claire Solon, President, Society of Chartered Surveyors

Looking through the pages of the 1916 journal of the Surveyors' Institution, one is immediately struck by the names and indeed the addresses of those who made up the organisation's membership. Predominantly male, middle class and residing in leafy pockets of privilege such as Rathgar, Ranelagh and Sandycove in Dublin, and Greystones in Co Wicklow, they represent much of what today's Society of Chartered Surveyors in Ireland most certainly is not.

The society's current president is not only its youngest ever, but is also a woman. Given her age and gender, Claire Solon would not have fitted the profile for the office she now occupies had she been around 100 years ago.

But Solon, whose day job sees her manage a €500m real estate portfolio in Ireland and the UK as head of property at Friends First, still has some appreciation of the arcane attitude which once prevailed within the property profession.

Seated across from me at the imposing boardroom table of the SCSI's Merrion Square headquarters, the Mullingar native recalls an incident from early on in her career, in which an elderly, senior architect presumed far too little of her.

"I was tasked with managing a design team for a competition. We had architects and engineers at a meeting. So I had my agenda prepared for the meeting and handed it out.

"One of the architects began overruling me and saying 'no, I think we should do it this way'. He then handed me this very large A3 document and said 'I think we need this photocopied'. So I went off, and for the next half an hour photocopied these documents. By the time I went back into the meeting, it had moved on and I wasn't able to insert myself back into it."

While Solon may have been caught off-guard by the incident, an effective combination of adroitness and assertiveness saw her avoid a repeat of it the following week.

"Another meeting took place and the same architect handed me a stack of documents and said 'we need to have these photocopied'. So I said 'well the photocopier is down the hall, and now here's the agenda'. Ultimately, if I couldn't handle that meeting, I was never going to last in this career," she recalls.

The SCSI president says while such incidents have been rare in her working life, she may never know of the lost opportunities there have been on account of her being female.

She adds that she can certainly think of times where she has been supported for being female.

"I feel I've gotten support more than anything," she says. As with so many others, Solon's entry into the industry was inspired by the involvement of family.

"I came into the profession because of my parents. My parents are both architects and certainly property would have been the discussion over many a dinner table when I was growing up."

Clearly conscious of the precarious living to be made from architecture, Solon's parents encouraged her to direct her energies and talent towards surveying.

Having earned her degree in property economics, her first job involved what she describes as a "short stint in hedge fund administration". From there she went on to work as director of development at Bennett Construction.

When the recession hit, Solon moved to the ESB where she was took responsibility for project managing the redevelopment of its Fitzwilliam Street building. With planning permission for the utility's headquarters secured last year. Solon became the ESB's head of estate with responsibility for its overall Irish property portfolio. She moved to her current role at Friends First last September.

Having gained considerable professional experience in the both the private and semi-state sector, Solon is well-placed to comment in her role as SCSI president on the challenges facing the country.

Asked about the burning issue of housing, she says "with a bit of foresight", the current shortage could easily have been avoided.

"We made lots of calls highlighting this and it's very disappointing that action wasn't taken. Obviously, the government was 'fire fighting' on a huge range of economic issues and this slipped down the agenda. We now are where we are and there's a whole range of issues.

"The cost of the provision of housing is one. We did a study recently on the real cost of housing delivery where we analysed real projects. Surprisingly, the hard costs and the building costs amounted to 45pc of the cost of the house. Land, development levies and planning costs made up the rest.

"The difficulty for builders is that the [achievable] price of a house isn't €250,000 in a lot of areas, so it doesn't make sense for a developer or a builder to build houses. They have to make a profit. You won't get funding unless you make money and you have to be a bit greedy about that."

Solon doesn't agree with those who say builders are being too greedy in terms of the profit they expect to make on the houses they bring to the market.

"Personally, I think for a project to be viable to go ahead; again it depends on how risky the project is, normally you're looking at retaining between 10pc and 20pc as a profit. With anything less than 10pc, if you're looking at an adverse planning condition or a problem with your supply chain, the costs are absolutely huge. A delay of three months with a project will cost you 5pc of your margin. It will be gone. But at the same time, it's definitely wrong to be looking for super, abnormal profit. That is not a part of a proper functioning market."

Solon adds that house builders face an extra obstacle from the banks. On this, she says: "The banks before they will lend, want to see that that profit is capable of being made because they're very conscious of the risk they're taking on as well." Based on the assumption that there will be a return at some point to 'normal' levels of housing delivery, what form should the country's new homes take? Are we looking at the rollout of a new swathe of three-bed Semi-Ds with postage stamp lawns front and back, or something else?

"It's a mixture. We also have to look at household formation sizes which are reducing. It's more likely we're going to have smaller houses and apartment living. Again, we must make sure that there is quality," she says.

Solon is more exercised about where the nation's new homes will be located.

"Certainly there were houses built in the previous boom time in the wrong locations. We have to have the foresight to plan better, If you're doing the analysis of where housing is to be located, it's about where the jobs are, and how do people get to and from work. The trend is that there are a reducing number of people in houses, people are separating. And there are different types of families now compared to 30 years ago. We have to make sure our housing meets the type of demand that there is," she says.

Certainly, increasing densities where demand exists is better than having large commuter belts on the outskirts of cities. The lifestyle that comes with that [commuter living] doesn't make for high quality living," she adds.

While the SCSI president acknowledges the benefit to the country of the development of the motorway network to date, she believes a lot more needs to be done both with it and other crucial elements of our infrastructure.

She says: "The motorways are probably one of the few things that have been a positive out of the last number of years. Getting in and out of Dublin is a lot easier than it used to be. But the road network regionally requires a lot of work. Getting in and out Dublin might be fine, but how do you get from Limerick to Sligo or to Cork? It's the road network regionally that needs work. And there are other things such as broadband. If you're trying to encourage the creation of businesses outside of Dublin, you have to be able to support those businesses, and a pretty basic tool for that is internet access. So the provision of broadband to schools, and the development of adequate sewage and water treatment facilities are all vital. Ultimately, while the Government has earmarked €42bn for that [infrastructure], it needs to happen quickly."

Solon says a failure to deliver the necessary infrastructure could well impede the delivery of housing and commercial office space that she says will be required for Ireland to maintain its "position as a business leader in Europe".

Asked for her views on newly-appointed housing minister Simon Coveney's 'Rebuilding Ireland' plan, she describes it as "very appropriate" as a plan, but adds that it "will be all about the delivery".

She says: "One area it might have dealt with a little better is the private residential market. The priority is obviously the provision of social and affordable housing. As a plan, it's appropriate but it will really be all about the delivery. We've had a quite a few plans before by successive governments. Ultimately it will come down to where we are in two or three years time [with its delivery]."

The SCSI will be making a pre-budget submission to the Department of Finance in advance of this October's Budget.

Asked what the body will be recommending in terms of increasing the delivery of housing, and more importantly housing that prospective buyers might be able to afford, Solon cites the matter of a VAT reduction as one key area finance minister Michael Noonan should consider.

"A reduction in the rate of VAT on housing is one of a basket of options available to the Government. In the UK, they have zero VAT for new housing, so there is that precedent. We saw how it worked here for the tourism industry but it's only one item in the arsenal. We also need to look at other ways of reducing costs and increasing the supply of housing."

As the calls grow louder and ever more insistent for increased and accelerated development of new homes and commercial office space to deal with the potential inflow of businesses that may seek to relocate following the UK's decision to vote in favour of Brexit, is Solon concerned that Ireland's planning laws are fit for purpose?

"A lot of the problems we have are more to do with the enforcement of planning regulations rather than the regulations themselves," she says, adding: "There's definitely been an improvement in recent years with more standardisation across the board. But I think some local authorities are nervous or lack the capacity or the skills, I'm not sure which, to enforce them.

"So if there are developers who are not compliant, sometimes there can be a failing in the system in relation to dealing with that."

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