# What can be done to bring down the cost of building homes?



## Brendan Burgess (7 May 2021)

This seems to be the big problem.

If it costs €500k to provide a house or an apartment in Dublin then people on average salaries or even on good salaries won't be able to buy them.  Giving them a reckless loan to pay this price is not a solution.

The best solution is to bring the price down.

It seems more expensive to build apartments, which is the opposite of what I would have thought. 

And if the price of land is the issue, then it makes more sense for a builder to build a €1.5m house rather than a starter home. 

Then I have heard people say that although there is a shortage of houses in rural areas, it's still cheaper to buy an existing house than to build a new one. 

Surely that is the issue we need to address first and foremost.

Arguing about financing houses and allocating 10% to social housing and preventing investors from buying houses is just less relevant.

Brendan


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## Purple (7 May 2021)

Average material costs and labour costs are around the same per square metre so modular designs which use cheaper materials, have less waste and reduce labour input would seem o be the way to go.


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## odyssey06 (7 May 2021)

The standards for apartments seem to have gone from one extreme to another.


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## MrEarl (7 May 2021)

I've never understood how removing both developers profit margins, and builders profit margins, wasn't the answer (i.e. the State builds housing on land it already owns).

Rather than contract out the work, recruit the skilled workforce needed. Then just move the teams of employees from one project, to the next.

Then there's the cost of materials, couldn't the State absorb the VAT, if building for its own account ?

There's unlikely to be a cost of finance, or if there is, it would be far less than the commercial rates that private contractors are operating off.

Ultimately, either sell the properties at a small margin over cost (strictly to owner occupiers, with conditionality), or hold the properties within the NPRF, with rental income going into it, to help provide for the State's future obligations.


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## MrEarl (7 May 2021)

Brendan Burgess said:


> ... Giving them a reckless loan to pay this price is not a solution.



That's a topic for a different thread, but also worthy of fresh discussion, given problems with the current arrangements, IMHO.


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## Purple (7 May 2021)

MrEarl said:


> I've never understood how removing both developers profit margins, and builders profit margins, wasn't the answer (i.e. the State builds housing on land it already owns).
> 
> Rather than contract out the work, recruit the skilled workforce needed. Then just move the teams of employees from one project, to the next.
> 
> ...


The fundamental problem relating specifically to build costs is that in real terms they are not open to international competition. If factory built houses could arrive on container ships they would be less than half the cost and of a superior quality because they would be built at high volume to high standards in massive factories on the mainland, USA or the Far East. 
That's why cars, TV's and just about every other transportable good is better and cheaper than it was 30 years ago. Construction, as an industry, is not really open to real competition and so is a dinosaur. 
Where I work we make things better and cheaper than we did 20 years ago and yet we are more profitable, employ more people and everyone gets paid more. That's what real competition does.


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## Leo (7 May 2021)

MrEarl said:


> I've never understood how removing both developers profit margins, and builders profit margins, wasn't the answer (i.e. the State builds housing on land it already owns).


It's a mixed bag really.

I recalled a posting in a similar debate here a few years ago where state costs per unit exceeded that of private developments.


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## Protocol (7 May 2021)

My figures are from the SCSI 2020 house building cost data: 114 sqm house in Dublin.

Construction cost = 179k, this includes site works and site development
"Soft" costs = 192.5k
Total costs = 371k.

The soft costs include:

Land = 61k
Finance = 16.7k
Profit = 43k
VAT = 44k


Purple knows more about the "hard" building costs, so I will comment on three other costs.
(1) site costs - these need to fall, in my opinion by at least 80%

The land costs for a 114 sqm house in Dublin in 2020 are *60,823.*

In my opinion this is way too high, it needs to fall to 10k-20k per house/apt.

(2) finance costs of *16,716.*

Given that ECB rates are 0%, these finance costs are way too high.

A friend works in property finance. He tells me senior debt for the first 60% is more expensive than you'd think, like 5-6%. After putting up 20%, the developer must then raise "mezzanine" finance for the final 20%. This can cost 12%-14%.

This is completely insane.


(3) developers 15% profit margin, *42,671 per unit*

If we de-risked development, this could be reduced.


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## MrEarl (7 May 2021)

Leo said:


> It's a mixed bag really.
> 
> I recalled a posting in a similar debate here a few years ago where state costs per unit exceeded that of private developments.



But doesnt that defy logic, assuming you've competent people, and a similar level of efficiency to that in the private sector?

Granted,  we're talking about getting away from the old image of a half dozen lads leaning on their shovels, drinking tea, and looking into a hole in the ground


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## Leo (7 May 2021)

Protocol said:


> In my opinion this is way too high, it needs to fall to 10k-20k per house/apt.


If a site in Dublin costs that, what should one in Leitrim cost?



Protocol said:


> (3) developers 15% profit margin, *42,671 per unit*


Certainly sounds like a lot, but how long does it take to earn that? 15% margin isn't that unusual.


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## Leo (7 May 2021)

MrEarl said:


> But doesnt that defy logic, assuming you've competent people, and a similar level of efficiency to that in the private sector?


The reality of public procurement processes means it takes longer to get things done and the ability to shop around for the best deal is limited. Look at local authority development sites, how many do you see on site after 5pm, or on weekends? Look at the tipper truck driver parked outside reading the newspaper, that's his job and you'll hear from his union rep if he's asked to do anything else. 

I presume the efficiency in the public sector piece was a joke. Efficiency isn't incentivised there.


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## MrEarl (7 May 2021)

Leo said:


> The reality of public procurement processes means it takes longer to get things done and the ability to shop around for the best deal is limted.
> 
> I presume the efficiency in the public sector piece was a joke. Efficiency isn't incentivised there.


Well,

I'm talking about a new approach,  where things would be done properly, - create a new entity, hire new employees (incl management from the private sector), new practices etc.

Much as I appreciate where you are coming from, there comes a time where the nonsense has to stop.


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## Brendan Burgess (7 May 2021)

I hear commentators quoting https://www.ocualann.ie/  Housing Body able to build houses very cheaply.


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## Protocol (7 May 2021)

Leo said:


> If a site in Dublin costs that, what should one in Leitrim cost?




Take the RTE site: 8.7 acres, 107.5m, plans for 614 units.

Land cost per unit, before any work done = 175k

This is way too high.

Maybe 100k per unit might be reasonable, or is that still too high?

So 60m for the land, or 7m per acre? Still sounds too high.


Turning to Leitrim, 20,000 per acre is okay.


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## DazedInPontoon (7 May 2021)

MrEarl said:


> But doesnt that defy logic, assuming you've competent people, and a similar level of efficiency to that in the private sector?


I think it defies logic to assume that you've competent people and a similar level of efficiency in a state run organisation.


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## Firefly (7 May 2021)

I have often wondered about Sale & Leaseback. Could the government put out to tender, for example, the building of 500 houses on state owned land with a guarantee to rent them for say 100 years? Developers would bid for the contract and they would probably be able to get funding from pension funds who would value long-term yield. The government doesn't have to put up any capital and can spread the cost over 100 years. The houses would be built quickly and efficiently you can be sure. The government could then give them to whoever it decides needs them most for whatever rent it decides....


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## Leo (7 May 2021)

Protocol said:


> Turning to Leitrim, 20,000 per acre is okay.



But if site costs aren't significantly more than agricultural prices you won't get the supply. 

If you knock the south Dublin site costs down then consumer demand will drive prices up anyway so that the developer just makes more profit.


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## Leo (7 May 2021)

MrEarl said:


> I'm talking about a new approach, where things would be done properly, - create a new entity, hire new employees (incl management from the private sector), new practices etc.


I get what you're saying, but that would require a complete overhaul of public services, I'd love to see it but I just can't see it happening.


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## SPC100 (8 May 2021)

From this article about increasing costs of building materials due to covid and supply chain issues https://www.irishtimes.com/business...y-put-construction-on-the-back-foot-1.4551172

“If you look at a three-bed semi-detached home, which sells for about €300,000 or €350,000, construction materials costs are 13 per cent of that,” he says. “That means that materials costs will go from 13 per cent to about 14 per cent.”


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## SPC100 (8 May 2021)

This is my previous proposal on one way to reduce land price - fast point to point transport network to unlock access to cheaper land.
https://www.askaboutmoney.com/threa...or-dublin-housing-supply-a-train-line.215826/

Other ideas to increase supply/reduce cost of land include:
-Higher density, which likely included more height
-More taxes on holding land that could be developed to encourage supply, e.g. sites with planning to be taxed at x percent a year. Sites without but which could be developed taxed at y per year. Tax rate increases each year over the next 40 years at a predetermined rate.
-Using government owned land
-More aggressive planning/rezoning
-more taxes/legislation to discourage land banking.


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## Mocame (8 May 2021)

On the O'Cualainn model.  They do not in fact build houses very cheaply.  They build with a big public subsidy and that is what keeps the sale costs down. 

To far they have constructed 49 houses in Ballymum on half provided for 'free' by Dublin City Council, development levies were also waived on the site (ie. the Council paid the costs of electricity and sewage provision) and the council also provided road access.  The extent of the subsidy provided here is not scaleable in my view which is why O'Cuallain have only provided 49 houses to date.  That bears repeating 49 houses to date.

They won a tender from Fingal County Council to supply affordable housing at similarly low 'costs' to Ballymum but if you examine their website that scheme has now been quietly dropped.  Apparently this is because they simply couldn't delivery at the costs proposed and FCC refused to cough up the huge additional subsidy demanded by O'C.


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## SPC100 (8 May 2021)

Protocol said:


> Construction cost = 179k, this includes site works and site development
> "Soft" costs = 192.5k
> Total costs = 371k.
> 
> ...


Thanks for sharing. That makes sense, I guess that model is basically looking for most of their soft costs to be 0, which are approximately half of the build price.

That said, that general idea does look like the quickest way to lower build 'costs'. Government provide land & finance, give up vat/levys/fess, and runs a tender. developer accepts lower margin (as much less risk). 

similar really to this suggestion


Firefly said:


> Could the government put out to tender, for example, the building of 500 houses on state owned land with a guarantee to rent them for say 100 years?


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## EasilyAmused (9 May 2021)

SPC100 said:


> From this article about increasing costs of building materials due to covid and supply chain issues https://www.irishtimes.com/business...y-put-construction-on-the-back-foot-1.4551172
> 
> “If you look at a three-bed semi-detached home, which sells for about €300,000 or €350,000, construction materials costs are 13 per cent of that,” he says. “That means that materials costs will go from 13 per cent to about 14 per cent.”



I’ll see you 14% and raise you to 30%:





__





						'Cost of building our house has risen by 30% in a year'
					





					amp.rte.ie
				




A “real life” example. Twins building similar houses in Offaly twelve months apart. 
30% increase in the cost of materials.

As B&Q is close to me than Woodies I tend to buy what I need there, but I come out empty handed so many times. 
Their timber aisle is been empty for months. 
They’ve only random nuts and bolts. You’re very unlikely to get the size and length you want. I need a dozen short M12 hex bolts with acorn nuts.... forget it. The best I could do is get 120mm bolts and saw them down to size. Then use regular bolts instead. Off to the co-op tomorrow instead.

Any DIY jobs I’m planning on doing at home may be tempered by the lack of materials. It’s frustrating.


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## SPC100 (9 May 2021)

I scanned that article this morning. Its a bit sensationalist, and open to misinterpretation imo.

He says steel is up 30p.c. and he says his house will cost in total 30 percent more than his brothers (finished early 2020). But they don't even say if the house spec or size is the same!

The article I linked states materials are increasing from 13 to 14 percent of the sale price. I.e. they are only a small part of overall cost.

Although I think everyone agrees strongly that costs are increasing.


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## EasilyAmused (9 May 2021)

Ah, yeah, this is very much an anecdotal article.


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## joe sod (9 May 2021)

Purple said:


> Average material costs and labour costs are around the same per square metre so modular designs which use cheaper materials, have less waste and reduce labour input would seem o be the way to go.


Have we not done that already though back in the 60s and 70s, Ballymun was that so were vast council flats from glasgow to london. That is modular , high volume construction , it was also done by the communists on a vast scale throughout Eastern Europe. Ballymun was demolished a decade ago along with many council blocks in the UK although the ones left in London are now sought after due to their location.  Surely we need to learn from the mistakes of the past or maybe demolishing them was the real mistake especially now in the era of high building costs.


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## Purple (10 May 2021)

joe sod said:


> Have we not done that already though back in the 60s and 70s, Ballymun was that so were vast council flats from glasgow to london. That is modular , high volume construction , it was also done by the communists on a vast scale throughout Eastern Europe. Ballymun was demolished a decade ago along with many council blocks in the UK although the ones left in London are now sought after due to their location.  Surely we need to learn from the mistakes of the past or maybe demolishing them was the real mistake especially now in the era of high building costs.


No, we haven't.
In Sweden 80% of single unit dwellings are factory built. is a bit of an overview.   
When an Irish company is supplying factory built homes to the USA but can't sell them here due to our antiquated standards which were developed around 100 year old manufacturing methods then there's something seriously wrong.


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## NoRegretsCoyote (10 May 2021)

One option would be for local authorities to actively facilitate development.

They would have CPO powers for site assembly and would provide fully-serviced sites for self-build.

Much simpler planning too. You'd be allowed to build what you like within certain dimensions.


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## Purple (10 May 2021)

NoRegretsCoyote said:


> One option would be for local authorities to actively facilitate development.
> 
> They would have CPO powers for site assembly and would provide fully-serviced sites for self-build.
> 
> Much simpler planning too. You'd be allowed to build what you like within certain dimensions.


We use 100 year old manufacturing methods which are highly labour intensive to build homes therefore they are very expensive and supply will be constrained by labour shortages. 
That, added to the fact that investment money will find its way into housing no matter what we do so long as Bond yields are so low, means that supply will never meet demand unless we fix the real supply side problems and change the laws around property ownership in some way which gives tenants the right to buy a property they have rented for more than a given period of time while also giving then longer fixed tenancies with rent controls. 
Those controls around rent should be set primarily with with yields in mind as what we really need to do ensure there is a desirable flow of capital into the sector as in a market with what is a semi permanent supply side constraint that's the real driver for purchase and rental prices.


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## Peanuts20 (10 May 2021)

It should be noted as well that modern houses are being built to a higher spec then some of the stuff that was thrown up in the Celtic Tiger era. for example, a small development of social housing was recently built about half a mile from my home. All of the houses have air heat pumps on the side. That's going to be great for those who will live in them as it will reduce the run costs and there is an environmental positive impact of doing this, but it's an additional cost to the build of perhaps €1500 that might not have been there 5 years ago. I would imagine the houses all have "nest" type controls as well. Little things like that all add to the cost, especially if the builder is sticking a margin on top of what the sub-contractor would charge.

So is one solution to build "simpler" houses?

When I look at some of the once off "mcMansions" thrown up around the country, I've little sympathy if someone is struggling to pay for it. Do they need all that space?


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## NoRegretsCoyote (10 May 2021)

Purple said:


> round property ownership in some way which gives tenants the right to buy a property they have rented for more than a given period of time


And watch landlords head for the door in even greater numbers.

The Law of Unintended Consequences would be huge here.


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## Purple (10 May 2021)

NoRegretsCoyote said:


> And watch landlords head for the door in even greater numbers.
> 
> The Law of Unintended Consequences would be huge here.


There are fewer but larger landlords. That's not necessarily a bad thing. 
What we are seeing now is a return to the sort of property ownership profile that hasn't been seen since Daniel O'Connell was in short pants.


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## joe sod (10 May 2021)

@Purple but you didn't address my question about the modular high volume construction that was done in ballymun and throughout UK ? Surely if we are to go down this route we need to find out the problems encountered before. I don't think the solution is modular one off houses as they are really only for the country. They suit dry cold big countries like the US and Scandinavia where wood rot is not as big an issue.

        I'm not dismissing it as of course it is the only way to deliver high volume, however in the urban areas and to achieve densification and stop the urban sprawl we need to 're examine the ballymun construction model. Afterall that was novel and was a Scandinavian innovation in the sixties. We obviously encountered big social problems with it subsequently. Therefore we need to look at the problems with this rather than dismissing them and pretending that we won't encounter them again because the Scandinavians have a new construction technique


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## Purple (10 May 2021)

joe sod said:


> @Purple but you didn't address my question about the modular high volume construction that was done in ballymun and throughout UK ? Surely if we are to go down this route we need to find out the problems encountered before. I don't think the solution is modular one off houses as they are really only for the country. They suit dry cold big countries like the US and Scandinavia where wood rot is not as big an issue.
> 
> I'm not dismissing it as of course it is the only way to deliver high volume, however in the urban areas and to achieve densification and stop the urban sprawl we need to 're examine the ballymun construction model. Afterall that was novel and was a Scandinavian innovation in the sixties. We obviously encountered big social problems with it subsequently. Therefore we need to look at the problems with this rather than dismissing them and pretending that we won't encounter them again because the Scandinavians have a new construction technique


The problem with much of the public housing constructed in the 60's and 70's was the people who lived in them. That said I'm not talking about public housing. I'm talking about all housing. We should build houses which look the same as they do now, in the same places as they are now, but use different construction methods. Houses should be manufactured and assembled, not built. We'd get a vastly superior product for a much lower price.
Toyota, the best built cars in the world, are built in a factory by robots. The VW factory in Wolfsburg is the biggest factory in Europe. It's full of robots and assembly lines. Hand built cars are rubbish by comparison. Houses, just like everything else, can be built cheaper and better using capital intensive methods which reduce labour inputs.


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## Leo (10 May 2021)

Purple said:


> The problem with much of the public housing constructed in the 60's and 70's was the people who lived in them.


Yeah, I know a few people who grew up in Ballymun and they talk of how much nicer the 'flats' there were compared to the alternatives. The problems stemmed from lack of opportunities and facilities.


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## Purple (10 May 2021)

Leo said:


> Yeah, I know a few people who grew up in Ballymun and they talk of how much nicer the 'flats' there were compared to the alternatives. The problems stemmed from lack of opportunities and facilities.


I work with a few people from the area who lived in the flats. 
A colleague from the area with 3 daughters said that there was nowhere else in the country with as much free services for children. His girls did Karate, Drama and sports, learned musical instruments and did cookery classes all provided for free (by the taxpayer). He now lives in a nice house which was given to him at a very low rent which he subsequently bought for a discounted price. He previously lived in the flats. His daughters are in, or through, college, also provided for free ( by the taxpayer).


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## PMU (10 May 2021)

Protocol said:


> The land costs for a 114 sqm house in Dublin in 2020 are *60,823.*
> 
> In my opinion this is way too high, it needs to fall to 10k-20k per house/apt.


 
I really doubt you would get land prices to fall to 10 – 20 k per house.  There is only a fixed amount of suitable land available.

But if land costs are too high, simply bring back ground rents and spread the cost of a percentage of the price over a long period. .  Allow for say 1/5 to 1/3 of the cost of land to be financed via a ground rent.  So the cost of a new house is reduced by that amount and the rest paid over the duration of the ground rent.

For example, you could calculate and fix ground rents at time of purchase at say X% over the ECB's interest rate and with a duration of e.g. 99 years.    The idea is the ground rent is set so the average purchaser ends up paying for example about 800 a year, i.e. about the same as a Sky Sports subscription.  So it's not a great imposition.  This is the key point - the ground rent should not be significantly different from consumer subscription charges voluntarily entered.  So the purchaser knows how much the ground rent will be.  If incentives are needed on the supply side, you could e.g. allow ground rent receipts to be tax free but charge CGT where ground rents are traded., etc.  There are many ways a new ground rent scheme could be developed - all we need is creative thinking.


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## shweeney (10 May 2021)

Protocol said:


> Land = 61k
> Finance = 16.7k
> Profit = 43k
> VAT = 44k


presumably govt. VAT receipts from housing have been fairly modest for the last 15 years. 
Could VAT be waived on houses priced below a certain threshold?

Coupled with govt-backed finance that's maybe 55K right there.

re: land costs - did the zoning windfall tax ever come into force?

also, and this is an unpopular suggestion in many circles, more needs to be done to encourage older homeowners to downsize. I live on a street of 4-bed houses, I'd say 75% are occupied by empty-nest retirees. There are similar streets all across Dublin, that's a lot of empty bedrooms and that's before you even get to the houses that are completely empty as a result of Fair Deal. 

Tax incentives have been very effective at driving the development of student accommodation, something similar for retirement-village type developments might be worth looking into, along with appropriate financing packages to make it more practical to downsize (currently tricky from a finance and tax perspective I believe).


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## Purple (10 May 2021)

shweeney said:


> presumably govt. VAT receipts from housing have been fairly modest for the last 15 years.
> Could VAT be waived on houses priced below a certain threshold?
> 
> Coupled with govt-backed finance that's maybe 55K right there.
> ...


The market sets the price. As long as there's a capacity constraint any efforts to reduce costs will just increase profits. We need to increase capacity before we reduce prices.


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## Allpartied (10 May 2021)

NoRegretsCoyote said:


> And watch landlords head for the door in even greater numbers.
> 
> The Law of Unintended Consequences would be huge here.



Strangely, even if the landlords head for the exit, their houses don't disappear.


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## The Horseman (10 May 2021)

Allpartied said:


> Strangely, even if the landlords head for the exit, their houses don't disappear.


The availability of beds to rent reduces. Simple example family with two kids in a rented three bed house. Landlord sells and a couple with no children purchase (with intention of having a family in the future). 

You still have one house but nowhere for the two kids previously living in the property to sleep!


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## Purple (10 May 2021)

The Horseman said:


> The availability of beds to rent reduces. Simple example family with two kids in a rented three bed house. Landlord sells and a couple with no children purchase (with intention of having a family in the future).
> 
> You still have one house but nowhere for the two kids previously living in the property to sleep!


And if a family with three kids buys it then the availability of beds increases. Either way things will average out so there'll be no net change.


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## joe sod (10 May 2021)

MrEarl said:


> Granted, we're talking about getting away from the old image of a half dozen lads leaning on their shovels, drinking tea, and looking into a hole in the gro


I know this was meant as a bit of a joke , but that image was really about council workers and that's the real reason why the state does not want to employ construction workers themselves, you end up with glorified county council staff.
If it was the case that construction was such a handy job where you could stand around a hole drinking tea well then why is it so hard to recruit construction workers, even with relatively high wages and over 400,000 people on the PUP ?
The fact is that a lot of construction is dirty,dangerous, hard work, you never know what obstacles and problems you are going to encounter when you start digging . Many facilities and utilities are not properly mapped and not in the places they are supposed to be, unlike in the Nordic countries. While it may be easy to draw a line on a plan by an architect, realising that line in reality can be very difficult when you encounter the above issues.


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## Purple (10 May 2021)

joe sod said:


> I know this was meant as a bit of a joke , but that image was really about council workers and that's the real reason why the state does not want to employ construction workers themselves, you end up with glorified county council staff.
> If it was the case that construction was such a handy job where you could stand around a hole drinking tea well then why is it so hard to recruit construction workers, even with relatively high wages and over 400,000 people on the PUP ?
> The fact is that a lot of construction is dirty,dangerous, hard work, you never know what obstacles and problems you are going to encounter when you start digging . Many facilities and utilities are not properly mapped and not in the places they are supposed to be, unlike in the Nordic countries. While it may be easy to draw a line on a plan by an architect, realising that line in reality can be very difficult when you encounter the above issues.


That is a problem but it really only effects the ground works. The rest of the house should be built in a factory and assembled onsite. Bathrooms can be built completely and pressure tested before arriving onsite. A few Irish companies have even tried this but have been unable to get the regulations modernised so that their products could be certified.

There is a US company, owned by an Irish American family with Limerick roots, now manufacturing factory built homes in Limerick so maybe the Dept of the Environment has got their house in order, 10 years later.


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## Peanuts20 (10 May 2021)

Purple said:


> That is a problem but it really only effects the ground works. The rest of the house should be built in a factory and assembled onsite. Bathrooms can be built completely and pressure tested before arriving onsite. A few Irish companies have even tried this but have been unable to get the regulations modernised so that their products could be certified.
> 
> There is a US company, owned by an Irish American family with Limerick roots, now manufacturing factory built homes in Limerick so maybe the Dept of the Environment has got their house in order, 10 years later.



There is probably a cultural thing in Ireland going back to the Rhofab prefab houses of the 70's (albeit I've been in a few and they weren't the worst.) that would need to be got past first.


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## Purple (10 May 2021)

Peanuts20 said:


> There is probably a cultural thing in Ireland going back to the Rhofab prefab houses of the 70's (albeit I've been in a few and they weren't the worst.) that would need to be got past first.


If Irish people are actually that stupid then we deserve to have a housing crisis. 

It's bad enough that so many idiots support measures to stimulate demand when the problems are on the supply side but if people are so gob-smackingly moronic that they are incapable of rational thought then to hell with them.


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## Peanuts20 (10 May 2021)

If you want to, you could buy a new 3 bed/1 bath semi in Carlow town for €199k and you would be 45 minutes from newlands cross so it's ideal for anyone working in Citywest or Tallaght

A 3 bed 2 bath terraced house in City west would set you back €365k. 

So if I am working in City west and don't want the commuting cost/time then the price for living near where I work is €166k

Now I know the 2 houses may have different build/quality etc but if you assume material and labour costs are more or less the same, then what makes up the difference- is it the land price?


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## Purple (10 May 2021)

Peanuts20 said:


> then what makes up the difference- is it the land price?


No, it's the market.


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## Purple (10 May 2021)

According to the Institute of Chartered Surveyors the cost of Finance accounts for 6% of the total cost of the average home. Given that factory built homes are faster to produce and can be manufactured while the groundworks are being done there should be a significant reduction in the cost of finance.
If the cost of finance is really up to 10%, as indicated in the link above, why are there not specialised finance companies competing within the sector? a 10% margin is beyond anything that can be made in Bonds or normal banking.
Given that the Institute of Chartered Surveyors are part of the construction sector they are hardly a neutral player in all this so should their numbers be taken with a pinch of salt?


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## DublinHead54 (10 May 2021)

Purple said:


> According to the Institute of Chartered Surveyors the cost of Finance accounts for 6% of the total cost of the average home. Given that factory built homes are faster to produce and can be manufactured while the groundworks are being done there should be a significant reduction in the cost of finance.
> If the cost of finance is really up to 10%, as indicated in the link above, why are there not specialised finance companies competing within the sector? a 10% margin is beyond anything that can be made in Bonds or normal banking.
> Given that the Institute of Chartered Surveyors are part of the construction sector they are hardly a neutral player in all this so should their numbers be taken with a pinch of salt?



I assume that the lending institutions have a 'cost of capital' aspect which impacts the rate they can lend at. This is all based on the current building process and perceived riskiness of the developers. 

I agree with you that if you changed the build process to pre-fab manufacturing which led to a quicker build process it reduces the risk and should reduce the cost of financing.


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## Purple (10 May 2021)

Dublinbay12 said:


> I agree with you that if you changed the build process to pre-fab manufacturing which led to a quicker build process it reduces the risk and should reduce the cost of financing.


It also means that if the developer goes bust while the houses are being manufactured they could be sold to a different developed and assembled onto different groundworks. In other words they will have a saleable value on an open market and so the risk to the lender is reduced.


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## MOB (10 May 2021)

Off-site manufacturing is definitely the way forward, but most lenders are if anything less keen to lend against moveable assets than against work on site.  If you are bankrolling a development and if a huge chunk of the development value is held off-site in factories, the financing becomes more complex and therefore more costly.  More often than not, the real effect is to shift risk to manufacturers and their bankers.   But none of this is insurmountable- just not necessarily cheaper.


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## SPC100 (10 May 2021)

Peanuts20 said:


> So if I am working in City west and don't want the commuting cost/time then the price for living near where I work is €166k
> 
> Now I know the 2 houses may have different build/quality etc but if you assume material and labour costs are more or less the same, then what makes up the difference- is it the land price?





Purple said:


> No, it's the market.


 
Agree it's the market.

But isn't the market effectively valuing that piece of land and it's location at 166k more. (let's assume the buildings are identical).


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## The Horseman (10 May 2021)

Purple said:


> And if a family with three kids buys it then the availability of beds increases. Either way things will average out so there'll be no net change.


No it does not as the number of bed spaces/bedrooms still stays the same. Normally people trade up for extra bedrooms or as a min trade to a property with the same no of bedrooms. Rarely do people trade down. Trading down is not unheard of but is unusual.


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## The Horseman (10 May 2021)

SPC100 said:


> Agree it's the market.
> 
> But isn't the market effectively valuing that piece of land and it's location at 166k more. (let's assume the buildings are identical).


The market is valuing the property because of the amenities surrounding your property in City West compared to your property in Carlow. it is to simple to compare two similar properties (in terms of size and build costs, finish etc) without factoring in the differences outside of the property itself. 

Build costs are not the only factor in the cost of a property, land costs will vary specifically for the reason above.


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## joe sod (10 May 2021)

Peanuts20 said:


> So if I am working in City west and don't want the commuting cost/time then the price for living near where I work is €166k



but the differential between the cost of a house in the  City and Carlow is a lot more than commuting costs, people are prepared to pay a substantial premium to live in the city. I know the whole Covid and working from home theme has sought to play this down, it was easy to to this when all the social life of the city was closed down. Within that 166k is also the value of the Dublin social scene.


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## sharkattack (10 May 2021)

My local school recently completed a small one classroom extension cost approx 180K.  The professional fees from the Architect were 38K including vat for design and supervision and then people wonder how building is so expensive.  Imagine how much professional fees would be on a housing estate when one room cost 38K.


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## letitroll (10 May 2021)

Remove VAT cost on new builds - now and forever and commit to never taxing the building of sovereign/societal infrastructure again! You lunatic politicians!
Increase existing property tax levels to replace tax receipts from (1)
Up vacant site tax considerably
Aggressively provide provisional residential zoning permissions to scare land horders as per (3) + increase development land 25km around Cork/Dublin/Galway/Limerick/Waterford
Government led road shows for skilled migration from Eastern Europe / RoW (plumbers, carpetenters etc.) - 3 year visas etc…..everyone likes to beat up the banks as greedy in the property market profit cycle……given the opportunity your friendly site plumber and his Union will gladly charge 2k a day….and pass the hat to the first time buyer……labor supply is key to maintain cost control
Tax breaks for returning Irish immigrants with construction skills
Increase apprenticeship programs to replace (no. 5 RoW) workers over time
Differentiate lending from banks to new build homes vs. existing homes…CBI lending multiples is one avenue…..…...One is GDP & capital stock accretive (new builds), the other is a financial transaction on an existing asset (with Caveats)…..but you get the point….they are not the same thing and shouldnt be treated as so…..shared equity & HTB is trying to achieve this 
Government should acquire the largest Irish PLC house builder - Glenveagh Properties - and make it a semi-state company with the same management,cost and incentive structures benchmarked against the other PLC home builder Cairn Home but Glenveagh will have a zero P&L target…….Glenveagh is building a company that is designed to be the low cost producer of starter homes in the state with per annum target builds of c.3,000 homes a year in 2023. Go pick it up now while its cheap - selling below book value.
Supply chains have proven to be fragile (shortages / inflation)…….Brexit….COVID……strategic aim of in-sourcing more building materials from the island of Ireland


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## Purple (11 May 2021)

I agree with many of your suggestions but;


letitroll said:


> Remove VAT cost on new builds - now and forever and commit to never taxing the building of sovereign/societal infrastructure again! You lunatic politicians!


That won't reduce the sell price, just the cost price. It's not a normal open market so reductions in cost won't translate to reductions in price.


letitroll said:


> + increase development land 25km around Cork/Dublin/Galway/Limerick/Waterford


Bad idea; we've enough urban sprawl as it is. If we can't to grow outside the citied then have development plans for our towns.


letitroll said:


> Government should acquire the largest Irish PLC house builder - Glenveagh Properties - and make it a semi-state company with the same management,cost and incentive structures benchmarked against the other PLC home builder Cairn Home but Glenveagh will have a zero P&L target…….Glenveagh is building a company that is designed to be the low cost producer of starter homes in the state with per annum target builds of c.3,000 homes a year in 2023. Go pick it up now while its cheap - selling below book value.


With all the public service type work practices, pensions and inefficiencies? I'd rather see the State just get better at procurement.


letitroll said:


> Supply chains have proven to be fragile (shortages / inflation)…….Brexit….COVID……strategic aim of in-sourcing more building materials from the island of Ireland


We don't produce the raw materials here. Attempting to on-shore our supply chain would add massively to our costs and serve no purpose as the suppliers have their suppliers and those will be outside Ireland anyway. We're not going to produce glass and PVC and the polymers for insulation and wiring and rubber and steel for nails and screws and hinges and latches for doors and windows and polymers for paint and varnish and all the other niche products that go into houses.


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## Leo (11 May 2021)

sharkattack said:


> My local school recently completed a small one classroom extension cost approx 180K.  The professional fees from the Architect were 38K including vat for design and supervision and then people wonder how building is so expensive.  Imagine how much professional fees would be on a housing estate when one room cost 38K.


The school no doubt had to go through a public procurement process where only the larger more expensive outfits quoted (procurement process is cumbersome and takes time, even when you don't win, so that's all added to the costs) 

Sounds like they got very bad value for the architect, but then, such project like having someone to carry the can, so pay a premium. 

Then, you just can't compare the supervision costs for a singe bad value room against a full estate development. They'll get much better value and economies of scale to bring the cost per unit well down.


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## joe sod (11 May 2021)

sharkattack said:


> My local school recently completed a small one classroom extension cost approx 180K.  The professional fees from the Architect were 38K including vat for design and supervision and then people wonder how building is so expensive.  Imagine how much professional fees would be on a housing estate when one room cost 38K.


Why can't schools use off the peg plans like they used to back in the sixties and seventies, these are the still the bedrock of our school buildings nearly 50 years later and are a lot better than some of the expensive bespoke architect stuff we build now


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## DublinHead54 (11 May 2021)

If a local authority has land available to build 100 houses on it today. How long is the process before the first brick is laid?

I remember seeing a comment in article that it can take something like 2 years to go through a procurement process to select the developer? If thats true, the measures being put in place by the current government won't be seen for 2+ years?

I watched Claire Byrne last night, and I was slightly disappointed that the cost of building houses did not feature more prominently. I understand all the frustrations, but I felt the debate didn't really reach a conclusion.


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## Leo (11 May 2021)

Dublinbay12 said:


> I remember seeing a comment in article that it can take something like 2 years to go through a procurement process to select the developer? If thats true, the measures being put in place by the current government won't be seen for 2+ years?



Yeah, 2+ years for public development, but private development can move a lot faster so that likely makes that route more appealing to a political party whose primary focus is the next election.


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## Purple (11 May 2021)

Leo said:


> Yeah, 2+ years for public development, but private development can move a lot faster so that likely makes that route more appealing to a political party whose primary focus is the next election.


SO basically we need private sector interests to deliver housing because the State Sector is grossly inefficient. That shouldn't come as a  shock to anyone.


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## Leo (11 May 2021)

Purple said:


> SO basically we need private sector interests to deliver housing because the State Sector is grossly inefficient. That shouldn't come as a  shock to anyone.


Exactly, and the whole children's hospital debacle is an ongoing reminder of just how expensive state run projects can become.


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## Purple (11 May 2021)

Leo said:


> Exactly, and the whole children's hospital debacle is an ongoing reminder of just how expensive state run projects can become.


Yep, this is about the ineptitude of the people involved in Public Procurement more than vulture funds and all the other headline grabbing emotive buzzwords. If the State was competent it could deliver public services cheaper and better but the citizens of this country are being let down in the provision of housing as well as health and so many other facets of the State sector.


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## letitroll (11 May 2021)

Purple said:


> That won't reduce the sell price, just the cost price. It's not a normal open market so reductions in cost won't translate to reductions in price.



Not straight away but in time - trust me its a normal market.....if the government gets out of the way.......short term YES the cost cuts go to the developers.......then they get competed away......if gross margins for home building here spiked to say 30%  (vs. 15-20%) you watch how quickly smart/hungry people will divert their energy and capital into the sector. This is what we want.


Purple said:


> Bad idea; we've enough urban sprawl as it is. If we can't to grow outside the citied then have development plans for our towns.


Lets see what happens post-pandemic - but people have voted with their feet for the last 50 years........ urbanisation is what people want......civil servants can have all the ideas they want around what people SHOULD want.....but the reality is people will decide.......but yes everything should be done to at least enable those who want to stay in rural towns to do that


Purple said:


> With all the public service type work practices, pensions and inefficiencies? I'd rather see the State just get better at procurement.


No - as I said it needs to remains a separate entity, aligned with private sector norms......just with a not for profit bent


Purple said:


> We don't produce the raw materials here. Attempting to on-shore our supply chain would add massively to our costs and serve no purpose as the suppliers have their suppliers and those will be outside Ireland anyway. We're not going to produce glass and PVC and the polymers for insulation and wiring and rubber and steel for nails and screws and hinges and latches for doors and windows and polymers for paint and varnish and all the other niche products that go into houses.


yes of course - sorry I wasnt suggesting some de Valera type insular strategy - just where it makes sense in terms of building up capability to supply ourselves at cost parity with RoW.....or where we should have a slight competitive advantage.....lumber for example......not rubber stoppers  we'll leave that to Vietnam


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## AlbacoreA (11 May 2021)

Purple said:


> Yep, this is about the ineptitude of the people involved in Public Procurement more than vulture funds and all the other headline grabbing emotive buzzwords. If the State was competent it could deliver public services cheaper and better but the citizens of this country are being let down in the provision of housing as well as health and so many other facets of the State sector.



I think it takes two to tango. 

Its a public sector that is solely focused on avoiding accountability and a private sector only too happy to take advantage of it.


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## AlbacoreA (11 May 2021)

We have a storage of housing and no one willing to make compromise on any part in order to fix that. 

So if anyone make any suggestions its eventually gets shot down by .... but standards...

Which is hypocritical, as we don't enforce those standards anyway. Its tokenism.


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## Purple (13 May 2021)

Has the cap in pension values led to an increased investment in property?
Has it driven highly paid people who have maxed out their pension contributions but want more income upon retirement into becoming landlords?


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## DublinHead54 (20 May 2021)

There is an article in the IT today regarding cost pressures due to rise of costs in materials. The quote below indicates that if builders absorb the costs and cut their profit margins then they won't be able to get financing. So clearly they are arguing it isn't as simple as reducing profit margins. 


_"Where the increased costs, ranging from €12,000 to €15,000 on top of the purchase price of €325,000 to €350,000 on new homes, are not added to the price of the home, profit margins would be halved, preventing builders from qualifying for financing to fund further houses or projects."_









						Higher cost of building materials could ‘lock out’ more home-buyers
					

Builders warn increased pandemic-related costs must be passed on to buyers




					www.irishtimes.com


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## Leo (20 May 2021)

Dublinbay12 said:


> So clearly they are arguing it isn't as simple as reducing profit margins.


Yeah, anyone who thought that was naïve. If profit margins here were so good we'd have many more construction firms looking to build.


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## jpd (20 May 2021)

Why do you think there was an influx of foreign property investment funds?


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## Purple (20 May 2021)

jpd said:


> Why do you think there was an influx of foreign property investment funds?


Because there's no return on bonds. That's driving an influx of capital into property in the developed world, which is why the problem of working people being priced out of the market is nowhere near unique to Ireland.


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## odyssey06 (20 May 2021)

AlbacoreA said:


> We have a storage of housing and no one willing to make compromise on any part in order to fix that.
> 
> So if anyone make any suggestions its eventually gets shot down by .... but standards...
> 
> Which is hypocritical, as we don't enforce those standards anyway. Its tokenism.


We have a shortage of housing and many of apartments are poor quality.
No one wants to live in a shoebox with dodgy fire standards, no storage and no sound proofing.
But on one is demanding for example dual aspect apartments yet this is what Dublin councils want.
At the same time driving up housing prices while outbidding FTBs for secondhand starter homes.
And outbidding tenants with HAP payments, while Dublin city council backed away from being a landlord because they couldn't handle the maintenance overhead and chasing down unpaid rents.
Madness.

Local government in Ireland is not fit for purpose.


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## Purple (20 May 2021)

odyssey06 said:


> We have a shortage of housing and many of apartments are poor quality.


My son is renting what a tiny apartment in Dublin for €1275 a month. It's pre 63 and under 400 square feet. He loves it.


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## odyssey06 (20 May 2021)

Purple said:


> My son is renting what a tiny apartment in Dublin for €1275 a month. It's pre 63 and under 400 square feet. He loves it.


There's a place for them too, if it's pre 63 it's probably well built with proper walls not 1980s paper thin ones.
He appreciates the privacy \ value of one's own place than renting say a dual aspect two bedroom with a stranger, and would not be alone in that.
Probably he has quite a few things still in storage for when needed in the family home.

Similarly, I also think it was a "let them eat cake" moment to ban bedsits without a guaranteed supply of superior accomodation to replace them. instead we have homeless hubs which are worse than bedsits.

But at the next stage in life, where you have a couple with kids on the way... most Irish apartments don't have enough storage or sound proofing for kids playing.
Say in Riga or Copenhagen you have apartment complexes with assigned storage, bike sheds, proper sound proofing.
There'll be a courtyard setup with a green area for residents, that kind of thing.

We need to be building safe but cheaper (than houses) apartments that are better than our current stock and don't have fantasy planning requirements like dual aspect; and ones that are family friendly.


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