Developments hampered by short lifespan of planning permissions and social housing rule

The "planning guillotine" is making it commercially imprudent for residential builders to embark on large scale developments, says Zoe director David Thorpey.

He contends the reduction of the life of a planning application from five years to two has caused "grave uncertainty", prompting some to turn to more lucrative commercial development as a result.

"If we start a development now and are not finished it in two years, then we have to go back and reapply and then have 20 per cent social and affordable housing imposed on us."

The reduced lifetime applies in the case of applications for residential developments lodged with the planning authorities after August 25th, 1999, and prior to the introduction of the housing strategies in the second quarter of 2001. Units in a scheme will have to be built to the external wall stage within two years.

While Zoe say it intends to stay in the residential game, it will only consider smaller schemes "where it is comfortable to commence".

Anti-investor initiatives imposed by the Government have also dealt a swift blow to the city centre apartment market. However the Government's recent decision to abolish the 9 per cent stamp duty on new build residential investments and the 2 per cent anti-speculative tax may go some way to injecting more life into the holiday homes market. However, as long as investors are not allowed to offset rental income against mortgage repayments, they are likely to remain out of the market.

One of the most high-profile city centre apartment developers, Zoe now devotes about five per cent of its business to commercial office schemes.

"We can only survive by developing and selling on," says David Thorpey. "We are turning to commercial because at the end of the day we have to make sure we get the maximum commercial take. We have a building on the corner of Hanover Street and Lime Street which had permission for both commercial and residential use and we opted for commercial."

Dublin Corporation recently refused Zoe planning permission to convert an apartment building near Smithfield into a 47,000 sq ft office block. Some residential developers are even baling out of the business, says Gerry Leahy of Leahy Property and Financial Consultants in Leixlip, Co Kildare. "Some housebuilders have made serious money during the boom and have got to the stage where they don't need the hassle. They are getting out and retiring. It is not physically possible to build a site of substance in two years. Many are going for commercial because it still has the full five year planning permission life."

He believes there is no real evidence of an increase in supply of ready-to-go sites in areas earmarked for residential development in the suburbs.

"Registration is the best indicator. There was a severe drop last quarter in the numbers registered with HomeBond. It appears to me that there is loads of talk and very few pipes. It's a joke - if only the Minister for the Environment and Local Government Noel Dempsey was as active on the ground as he is issuing press releases. He is operating on the basis of sound bites and PR."

The Department of the Environment and Local Government said overall HomeBond registrations in 2000 were up 2.2 per cent on 1999, but "did fall back in the latter part of last year". In a written statement it said that it is "difficult and too soon to attribute this to any particular reason. It may simply be due to the chronic weather conditions that existed in the last quarter of the year which would have made it very difficult to pour foundations."

When asked about the current status of serviced land, the Department said "there are 4,500 acres of zoned serviced land in Dublin which could provide over 67,000 housing units, and 3,500 acres of zoned serviced land in the mid-east region with an estimated yield of 28,500."