If you look at city skylines across Europe, the obvious difference between them and our own fair Dublin for example, is the lack of high rise buildings. Particularly high rise apartment complexes. Throughout Europe, developments of this nature account for up to 50% if not more of the total housing market. Here in Ireland that number barely climbs over 10%. Obviously this disparity is a major contributing factor to the current housing crisis. So what’s the deal? Why are more apartments not being built in the city at affordable rates? The latest Society of Chartered Surveyors (SCSI) report on the matter makes for interesting reading.
The report estimates the cost of building and bringing to market a two-bedroom apartment in Dublin. The cost ranges from just over 350K for a low-rise build in the suburbs, to over €600K for a high-rise unit in the city. These costs include construction spend, land prices, developers’ margins and any other fees.
The construction industry claims increased structural requirements whether it’s lifts, car parks or fire safety regulations can’t be delivered at cheap rates, at least not in the current market. Taxes like 23% VAT on materials and 21% on any profits certainly are not helping matters. But all that aside we are left with the undeniable situation, that the vast majority of buyers will not be able to afford those price tags. So we now see a situation where city apartment developments are no longer being developed for the sales market, but rather for the rental market instead.
Take for example a young couple looking to get on to the property ladder and buy their first home. City centre apartments are exactly what a young couple may want. Close to the hustle and bustle of the city and for most, close to work. Keeping in mind Central bank borrowing rules, the couple would need nearly 40K for a deposit and both be earning nearly 100K to afford even the cheapest available units. While these numbers are certainly not unachievable, there are few first time buyers in that category. Also a factor to consider is the new ‘Work from Home’ movement. Why would a young couple put all that money into a small apartment when they could buy a 4 bedroom house in Portmarknock or Dun Laoghaire and work from home. With solid public transport they are both far more appealing options at the moment.
Despite all of this however, there is no denying that these units will always sell. The thriving tech industry in Ireland and particularly Dublin City has led to many firms (and their well paid executives) setting down roots in the city. With the large incomes associated with the professions, these prices are not so out of reach.
At the end of the day in order to meet the demand of the housing sector, Ireland needs to embrace the High rise philosophy of our European neighbours. But this simply won’t happen until regulations and costs of construction and bringing a property to market are reduced or at least brought in line with other European countries.
