Apartment building costs have risen by €27,000
Total bill for building one unit now €440,000
The cost of building a mid-range apartment has shot up by €27,000 during the Covid-19 emergency, according to a leading construction consultancy firm.
It found that the hard costs of building a two-bed, standard spec, medium-rise suburban apartment is now €219,000.
The main reason for the increase is the dramatic rise in the price of materials which occurred during the pandemic.
Consultants Mitchell McDermott found the cost of timber has increased by 86pc, windows by 61pc, steel by 52pc and sanitary ware by 20pc.
It said the €219,000 cost-of-construction figure excludes indirect costs, parking, site works and VAT.
If those are included the total cost of delivering the apartment is in the region of €440,000.
Paul Mitchell, one of the authors of the report, said that if this apartment was to be viable, the sales price would have to be in excess of €440,000.
He predicted that construction costs will increase by 6pc to 7pc this year.
“Emission restrictions in China has led to a reduction in steel supply, while major post-Covid building programmes in the US and Europe are driving the demand for timber,” he said.
“One would expect a lot of the cost spikes to correct themselves in the short to medium term once supply chains return to normal.
“That said, the situation in the Ukraine will cause additional supply chain issues for certain materials.”
A separate report from the Banking Payments Federation of Ireland (BPFI) shows a fall-off in the fourth quarter of last year, due to Covid shutdowns.
The banking body said capacity in the construction sector remains an issue, with labour shortages one of the main issues.
The banks said the 30,700 housing starts last year were a 42pc increase on 2020.
More than 50,000 new residential units are expected to be built between now and the end of 2023, the banking body said.
Mitchell McDermott said there was a 30pc increase in the number of judicial reviews taken against Strategic Housing Developments (SHDs) last year.
This meant that although planning permission was granted for 26,151 residential units under the SHD process, over half of them were unable to go ahead because of judicial reviews.
Mr Mitchell said: “On the one hand while nearly everyone agrees we need more supply, on the other the supply is being choked off by the increasing prevalence of judicial reviews.”
He said there was an urgent need to reform the planning process.
He also criticised the proposals from a number of Dublin local authorities to put restrictions on Build to Rent (BTR) developments or restrictions on the proportion of units which can be for rent in new developments. These proposals, if passed, will seriously damage supply, he said.
According to the report, 20,000 residential units, with 5,000 of them apartments, were completed in 2021.
Mr Mitchell said the fact 20,000 units were completed – even with sites closed for 30pc of the working year – was a positive.
This implies that the number could have been close to 30,000 units if it wasn’t for lockdowns, and shows what is possible. The consultants believe 25,000 to 30,000 units will be produced this year, with the total expected to be 35,000, the annual figure most commentators believe we need to meet demand.