Surveyors suggest ‘not so fancy’ buildings and smaller apartments

Reducing the size of apartments by 10 per cent and constructing “not so fancy” buildings could help to reduce the cost of delivering new homes, according to the Society of Chartered Surveyors Ireland (SCSI) on Tuesday.

A report by the SCSI on The Real Costs of New Apartment Delivery found that building two-bedroom apartments (79sq m) in Dublin was more expensive than constructing a three-bedroom semi-detached house.

Paul Mitchell, chairman of the SCSI working group that authored the report, said there were several avenues worth exploring to reduce costs.

“What if site costs were to come down by 30 per cent?” he said. “What if we were able to change apartment design and construction, and reduce construction input costs by five per cent?

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“We’re not talking about paying the guy who’s still on 2007 wages five per cent less. We’re saying let’s not make our buildings so fancy. Let’s take out 50 per cent of the parking.

“We’ve also looked at reducing the size of apartments by 10 per cent, which is quite an emotive thing. But, again, some people have said that if we reduce the sizes by 10 per cent, all our problems will go away overnight.”

On statutory fees and contributions, Mr Mitchell said refunding developers who sell apartments at affordable levels would help with viability.

“If an apartment is sold at an affordable level, the developer would get the contributions back in order to make the scheme viable,” he said. “That only applies to apartments sold at an affordable level.

“We would agree that if you reduce VAT from 13.5 per cent to 9 per cent – and people are building up sites – that’s just an input cost that has changed. Therefore, that will get added on to the sales price. It is not the thing to do.”

The report by the SCSI found a two-bedroom, low-rise apartment in suburban Dublin costs €293,000-€346,000, excluding VAT to deliver. A medium rise apartment (five to eight storeys) in the suburbs costs €400,000-€418,000, while building the same development in the city costs €470,000-€578,000.

The figures include non-construction costs, and the data was collected from chartered surveyors working on 28 apartment schemes consisting of 2,146 apartments.

Viability gap

Asked how many of the 28 apartment schemes were dealing with a viability gap in terms of cost of delivery versus sale price, he said: “In terms of the schemes that were viable out of the basket we looked at, probably about 20 per cent of them are.”

Kevin James, chairman of the SCSI quantity surveying group, said the research was based on the information submitted to the society.

“We are aware of other projects out there that have different pricing levels,” he said. “The message is that there are a number of key issues to be looked at, to encourage debate and find solutions.”

Another member of the working group, Michael Cleary, said the explanation as to why apartments are being developed if they are unviable was down to “site costs and funding costs are different than what we have here”.

“The likelihood is that they either procured the site before the site costs reached current levels, or [are] obtaining funding at a lower cost,” he said.

“The cost of finance to make apartments happen, particularly after the downturn, is prohibitive for a lot of builders unless they have a strong balance sheet or have raised sufficient money to do that.”