Ballymore founder warns soaring build costs ‘biggest risk’
Cost rises of 7-10 per cent in next two years threaten development, Seán Mulryan says
Chairman and group chief executive of Ballymore Group Seán Mulryan: “Because there aren’t enough tradesmen, they’re going to call the tune.” Photograph: Alan Betson
Ballymore Group’s founder Seán Mulryan, one of the highest-profile developers s to come through the property crash, has warned that surging construction costs pose “the biggest risk” as the Republic grapples with a housing crisis.
In an interview with The Irish Times, Mr Mulryan said he expected build cost inflation to run at between 7 per cent and 10 per cent in each of the next two years.
“Because there aren’t enough tradesmen, they’re going to call the tune – and, by the way, builders’ suppliers are just going to go for it, too,” said Mr Mulryan, whose group exited the National Asset Management Agency in late 2015 after repaying €3.2 billion in gross borrowings. “That’s the biggest risk going forward for development in Ireland.”
The Construction Industry Federation estimates that apprenticeships in the Republic have fallen from about 27,000 during the boom to about 3,000. It says that about 5,000 a year need to be signed up to meet demand.
Meanwhile, shares in publicly-quoted homebuilders Glenveagh Properties and Cairn Homes have fallen by more than 17 per cent and 13 per cent, respectively, since mid-July, partly on concerns about rising Irish construction costs.
While Central Statistics Office figures have shown that labour costs in the industry were growing at an annual 5.4 per cent rate the second quarter, Cairn kept its build cost inflation at 2.9 per cent in the first half, while Glenveagh recently stuck to its 4 per cent guidance.
Mr Mulryan noted that build costs in London, Ballymore’s key market, surged by 30 per cent between 2012 and 2016 amid a shortfall of subcontractors. The group has built close to 20,000 homes in the UK capital since the early 1990s and is currently working on six developments in the city with a gross development value of £4.06 billion (€4.55 billion) that will total 8,935 units when completed.
He said that while the London market had “certainly slowed” in the wake of Brexit, prices were holding up better in the middle level of the market, where Ballymore is most active, than the top end. The company is also cushioned by its practice of forward-selling a large portion of units before developing, he said.
In Dublin, Ballymore is working with Singapore’s Oxley on mixed development in Dublin’s north docklands, and recently partnering with CIÉ to deliver a major scheme next to Connolly station. It is also among three parties bidding to redevelop part of the Guinness brewery at St James’s Gate in Dublin, which Mr Mulryan declined to comment on.
Meanwhile, it emerged on Thursday evening that Ballymore has partnered with the Hong Kong-based Kwok family to build a £1.2 billion skyscraper scheme in the Isle of Dogs in London.
Estates Gazette, which first reported this development, said the partners paid £50.8 million for two connected sites, which have planning consent for 1,513 homes across six towers rising to 44 storeys.