The cost of building a three-bed semi-detached home in Dublin is now at €371,000 with construction costs accounting for less than half the overall, according to the Society of Chartered Surveyors Ireland (SCSI).
This is €41,000 or 12 per cent higher than four years ago, the last time the construction industry body carried out a similar survey.
The SCSI said the increase was primarily driven by an increase in “hard costs” – in other words the bricks and mortar element of construction – which rose by 19 per cent or €29,000 during the period.
The so-called “soft costs” – land, development levies, professional fees, VAT and developers’ margin – increased by 7 per cent or €12,000, it said.
Nonetheless the report indicates that soft costs accounted for 52 per cent or €192,000 of the €371,000 total.
Land and acquisition costs of €61,000 (16 per cent), VAT of €44,000 and a developers’ margin of €44,000 make up the main elements of soft costs, it said, underscoring the argument that high land values are a key driver of property prices here.
The SCSI’s report – entitled The Real Cost of New Housing Delivery 2020 – is based on a study of 30 residential sites in the greater Dublin area.
The report called for a commission on housing to examine the tax treatment of new housing, noting that VAT makes up 12 per cent (€44,000) of the total cost of a new home while in the UK there is no VAT on new houses.
“New private housing supply will only increase to meet demand when the affordability/viability issue is placed at the centre of housing policy development and critically, it must be based on a detailed examination of the real costs of housing delivery,” Micheál Mahon, incoming SCSI president, said.
“If the Government is serious about tackling the housing crisis and building the 30,000 to 35,000 homes which are required, it needs to tackle the significant increases which have occurred in housing delivery costs as a matter of urgency,” he said.
In its report, the SCSI also highlighted that the cost-saving differential in the delivery of private housing compared to social housing can be within the range of €140,000-€160,000 due “to the nil cost attributed to land, levies, finance, developers’ margin and sales and marketing costs”.
As a result, it said the Government should commence a large-scale public-sector house building programme via local authorities to take advantage of a likely softening in construction costs over the coming years.
"There is a major affordability gap for first-time buyers trying to purchase a home in line with Central Bank of Ireland regulations and this gap raises serious questions over the viability of new house building," Mr Mahon said.
“The SCSI does not believe there is a single solution to this problem. That is why we are advocating a multifaceted approach, including; the establishment of a commission on housing – as set out in the Programme for Government – to review the tax treatment of new housing,” he said.