The total development cost of building a two-bed apartment now stands at about €440,000 as soaring inflation has added just under €27,000 to the bill since Covid began, a leading firm of project managers has calculated.
Mitchell McDermott has also warned that Dublin planners’ efforts to limit build-to-rent apartment blocks threatens supply, as costs mean building them to sell is not viable.
They calculate that inflation has added €26,876 to the cost of building a mid-range two-bedroom apartment during the course of the pandemic, bringing the construction bill alone to €219,000.
Once site costs, VAT and other expenses including parking are added, the total reaches €440,000, the project managers say in a report published on Wednesday.
“If this apartment was to be viable, the sales price would have to be in excess of €440,000,” adds the report.
One of its authors, Paul Mitchell, warns that Dublin councils' proposals to curb building to rent will stall the construction of new homes.
Planning authorities including Dublin City Council want to restrict build-to-rent developments or limit the number of homes that can be rented in any new block.
“These proposals if passed will seriously damage supply,” he says. He explains that high costs mean building apartments to sell “does not stack up” in many areas.
Similarly, forcing builders to sell 40 per cent of the dwellings in one block renders the entire scheme unviable, he says.
“While the cost of imported building materials is outside our control, the way the new planning system operates isn’t and we really need to minimise costly delays and ensure it works effectively and efficiently,” Mr Mitchell argues.
He also predicts that the new scheme to fast-track permission for projects of 100 or more homes will change little about the planning system.
Projects allowed under the large-scale residential development scheme’s predecessor ended up bogged down in judicial reviews, which remain part of the new plan, Mr Mitchell notes.
His firm's report shows that the number of judicial reviews - where a High Court judge scrutinises a planning decision - taken against projects given permission under the old strategic housing initiative increased 30 per cent last year.
While planners gave permission for 26,151 homes under the strategic housing process, judicial reviews prevented 14,296 of them from going ahead, the report states.
Prices of materials including steel, timber, windows and bathroom fittings rose between 20 per cent and 86 per cent last year, Mitchell McDermott found.
Slowing steel production in China, and US and European post-Covid building programmes could boost costs by a further 6 to 7 per cent this year, it predicted.
Mitchell McDermott said the cost spikes could correct themselves once supply networks normalise. "That said, the situation in the Ukraine will cause additional supply chain issues for certain materials."