Tuesday 12 December 2017

Construction chief: Why our builders are not building

CIF director Hubert FitzPatrick explains why housing supply is so low as demand heightens

Hubert FitzPatrick, CIF director for housing, says builders are being kept off site.
Hubert FitzPatrick, CIF director for housing, says builders are being kept off site.
The CIF director for housing says builders are being kept off site due to rising costs of construction
Mark Keenan

Mark Keenan

DESPITE a three year housing crisis in the capital, second-hand homes in large chunks of West and North County Dublin are still valued less than the cost of building a new one.

It means that despite stiff property price hikes in the last three years (latterly above 20pc), it's still essentially uneconomic to build in parts of Dublin where the most land is available.

This is the assertion of Hubert FitzPatrick, the director of housing and planning at the Construction Industry Federation (CIF), the organisation which represents Ireland's builders and developers and a keynote speaker at the forthcoming National Residential Property Conference 2015 at UCD on April 30.

FitzPatrick is the organisation's main conduit to the individuals and firms who build our homes. A noted number-cruncher and analyst, FitzPatrick knows why Ireland's builders have not and cannot build the numbers we require - not only in Dublin, but the other big towns and cities in Ireland where shortage is increasingly becoming a factor.

FitzPatrick will take to the podium on Thursday, April 30 to address the housing supply problem from the builder's perspective.

"It will probably take another year before some western and northern parts of Dublin, as well as many parts of Cork and Limerick cities, reach the threshold that makes homes viable to build," he says.

He is also keen to assert that because of this we must initially ensure development land is available in those areas where house building is actually financially viable.

"People forget that many key construction costs have risen. Outside of greater Dublin, second-hand house prices are currently running as low as 50pc of what it costs to build them.

And he wants us to know that Ireland's builders - there are 80,000 plus unemployed construction workers on the live register today - desperately want to get back to building.

Of course, increased costs, including materials, have played a role but so too have upgraded building regulations that have improved the standard of new Irish housing immeasurably. But many forget that these improvements have also added to the overall cost of construction.

Another factor he talks about which has kept costs high, has been the tendency of Irish local authorities, particularly in Dublin, to stick with 'pre-bust' levels of levies for services.

"Of course these payments now exclude water services. But typically we are talking about €10,000 to €15,000 per unit rising as high as €60,000 to €70,000 in one location under the jurisdiction of Dun Laoghaire Rathdown."

FitzPatrick is clear on what he believes must be done from this point on: "We need to open up new green-field sites in areas like the Cherrywood Strategic Development Zone and the Clonburis Strategic Development Zone.

"We need good, steady phased development to ensure a sustainable supply of homes is built to cater for demand on an annual basis." He also points to the anomaly in the nature of existing planning permissions.

"Family homes are where the shortage is most pronounced at the moment, but Government research shows that out of permissions granted for 31,000 units, about 21,000 of them are for apartments."

He believes this anomaly needs to be looked at in an urgent manner. "We have seen the arrival of three-storey terrace family homes. It's not that Irish families want semi-detached houses with a garden front and rear, but it is clear that they do want an own-door home."

Finance of course has also become a stumbling block.

"The days when a developer could get full finance from a bank are long gone," he adds. "Now the reality is that perhaps 60pc is possible, but the rest needs to be raised elsewhere."

CIF members include many very traditional 'nuts and bolts' people long used to plain bank financing and these have been suspicious or wary of private equity funding outfits who also demand much higher interest.

"The Department of Finance and ourselves recently hosted an event to put builders in touch with financiers. It went well and the first steps have been taken," says FitzPatrick.

But we've a long way to go when 11,000 homes were constructed nationwide last year while it is estimated Dublin alone needs three times that.

"We've made a start but we really need all interests including Government and local authorities to weigh in to solve this crisis."

Indo Property

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