There was an entry on here last year that tried to capture the costs of building a house here in the Republic of Ireland, including the cost of sites, and to compare our costs with our neighbours across the border in Northern Ireland. This entry provides an update.
There are five main sources for the information
(1) The Irish Society of Chartered Surveyors (SCS) house rebuilding costs (which includes demolition and clearance) which was last updated in April 2010 with information researched in February 2010. These costs relate to the Republic of Ireland.
(2) The Association of British Insurers (ABI) /RICS Building Cost Information Service rebuilding costs (constantly updated). The calculator provided by the ABI is for the UK but you may select calculations by reference to a region such as Northern Ireland.
(3) The Department of the Environment Heritage and Local Government House Building Cost Index (updated monthly). This is for the Republic of Ireland and merely provides information as to the change in prices from one month to the next.
(4) The Irish Association of Self Builders provides extensive resources on costs but appears not to have been recently updated. There is construction cost service provided for a fee which includes input from quantity surveyors.
(5) DAFT.ie asking prices for sites in both the Republic and Northern Ireland.
The furniture.ie website might also be of assistance
The highlights are:
(1) Rebuilding costs appear to have increased by 1% in the Republic between Feb 2009 and Feb 2010 according to the SCS. According to the DoEHLG, prices dropped 0.5% between 2009 and 2010 but increased by 1.5% between Jan 2010 and Jan 2011.
(2) Rebuilding costs in Northern Ireland appear to have increased by 9% (the exchange rate of GBP £1 = €1.15 has remained the same since last year so the increase reflects both the local increase in costs in Northern Ireland and also the cost in euros) since a year ago
(3) Rebuilding costs in Ireland are in the €116-179 psf range depending on region and type of building, in Northern Ireland the average across the six counties is GBP £67 (€77) psf – in other words costs, on a similar basis, are 51-132% higher in the Republic than in Northern Ireland
(4) Site costs continue to be all over the place in the Republic but appear from a non-scientific review to be cheaper for rural locations in the Republic but more expensive in the Republic for urban sites.
Here is a table of the latest rebuilding costs from the SCS as at February 2010.
This is the performance of the DoEHLG’s building cost index over the past two years showing a 0.53% decline between Jan 2009 and Jan 2010 and a 1.59% increase between Jan 2010 and Jan 2011.
There are some 10,000 sites presently on offer from DAFT.ie in the Republic. Because the prices shown are asking prices, it is not possible to conclude the going rate for settled prices but looking at asking prices the impression is that an unexceptional rural 0.5 acre site with full planning permission is still asking €50,000+ but it is also true that prices are all over the place with 1.5 acres with full planning permission in place asking €20,000. 0.5 acres sites with “views” – lakes, mountains, countryside, sea or close to a golf course – are still asking close to €100,000 but again prices are all over the place and there are 0.5 acres sites with “views” available for €20,000 asking. So it would seem from the comfort of an armchair that the site market is dysfunctional in that there is a wide range for asking prices for seemingly similar sites. This may be largely the government’s fault for failing to put in place a register of sale prices, though you would also have to question the contribution of auctioneers to the setting of asking prices. In terms of Dublin, again the disparity in asking prices makes it nigh impossible to discern the going rates. Northern Ireland presently has 1,250 sites for sale on DAFT.ie and again the prices quoted are asking prices but there appears to be more consistency in pricing with sites typically costing GBP £50-125,000 with no discernible distinction between general rural and urban locations. It seems from a basic review of asking prices that rural sites in the Republic are cheaper than in Northern Ireland and urban sites are far more expensive. Odd. Built house prices in the north would generally appear cheaper for urban areas and comparable with the Republic for rural areas. This would all seem to point to an arbitrage opportunity in the Republic to use Northern Irish companies to build houses.
As for building costs for new homes which would need strip out demolition and clearance from the rebuilding costs shown by the SCS but add in planning permission, architectural/engineer fees, connection to services and local authority levies, difficult to say but my sense is that they are from €80-150 psf depending on location and whether or not the home is a self-build. I cannot see any other conclusion but that the building costs in Northern Ireland are like-for-like far cheaper than the Republic’s.
NAMA Wine Lake 
Extract from a letter published in Irish Times on 7th December 2007:
The magnitude of profits made by the building industry are mind blowing. Over the ten years to end 2006, 608,000 new houses were completed and average annual prices increased by 199% from €102,000 to €306,000. On this basis, the cumulative value of new house sales over the decade was €131 billion.
During this same period, building costs increased by 61%. If land and other costs and profits had only risen in line with building costs over the decade then the average price of a house would have hit €164,000 in 2006 and the cumulative value of sales over the ten years would have been just €86 billion, a difference of €45 billion. After allowing for VAT of €8 billion, the residual difference of €37 billion is largely attributable to profits for land owners and builders.
On this basis, about one-third of future mortgage repayments by house buyers will be used to pay for these extraordinary profits. It should not be ignored that financial institutions have also profited as they have lent far more than strictly necessary. Likewise, the exchequer, through stamp duty, and a raft of service providers including brokers, insurance companies, solicitors and auctioneers have benefited from this windfall.
In addition to being burdened by excessive borrowings, many recent purchasers have had to purchase lower grade accommodation, live in less accessible locations, work harder and longer, and demand higher earning to pay their inflated mortgages. This has disrupted communities, reduced leisure time and living standards, and impacted on national competitiveness and long term growth prospects.
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Building costs in the Republic are more expensive than those in Northern Ireland. This is as a result of higher VAT on materials and our higher wage levels thanks to the sweetheart deals made between the Unions and Bertie. If one attempted to bring tradesmen from the north to a site in the Republic and paid them UK wage levels there would be a picket on the site within hours.
The profit is and always has been in the land, not in the building.
I should perhaps clarify my last posting. The two major variables in the cost “build-up” of a development project are land and profit. Most other costs, including construction and development costs, fees, levies and VAT have levels that are relatively stable.
The biggest movement occurs in the end value of the product and that impacts most on the amount that a developer is prepared to pay for the underlying land and in his/her (including wives here!) profit return. In normal times, it used to be that these represented about 15% each of the sales price of a residential unit net of VAT. Of course, this yardstick was thrown out of the window with the onset of the celtic tiger and the property bubble.
Anyone who studies long-term mean values will realise that such an aberration signals a bubble and should have acted accordingly. Few did.
@WSTT, “it used to be that these represented about 15% each of the sales price of a residential unit net of VAT” When you say “these” do you mean the underlying land and the profit return? So (site cost plus profit)/(sale price excluding VAT) was 15% in normal times? I understood, going back to before the boom, the site alone would typically be 15% of the sales price.
EDIT: D-oh! Just realised that “each” means the site price was 15% and the profit was 15%.
Could you clarify “profit”. Do you mean contribution to overheads etc. or do you mean net profit (after interest etc.)? If the latter, 15% looks extraordinarily high.
Maybe, someone could lay hands on the acounts of, say, Abbey or McInerney during the 90s to see what their normal net margins were. I suspect that about 5% would have been been judged as (very) satisfactory even though they were probably selling real houses with gardens (not boxes) to buyers who had mortages equivalent to 3-4 times annual earnings.
Doing a rough estimate, a family of four needs an income of between 75,000 and 100,000 to buy a house at the low end. How many families have this level of income in Ireland? And, what are the prospects for future earnings at this range?
The real estate bubble has done what the neutron bomb was designed to do, kill off all the people and leave the buildings intact.
@Jake, I think one of the implications of the present cost of constructing a new house is that it might well make more sense to buy an already-constructed house. Sadly there is very little reliable information on new construction – the figures published by the DoEHLG for “new build” are derived from ESB connections and it may well be that houses constructed in 2006 are still only now being connected. DKM was estimating new construction in 2010 at 7,500. With building costs (excluding sites) increasing but with property set for a further 30% forecast fall according to the Central Bank’s baseline outlook (they unconvincingly say it’s not a forecast by the way), it seems that for some time to come it will generally make more financial sense to buy an already-constructed house unless you have special circumstances (eg a particular rural site , architectural preference, self build capability)
On the other hand, it is interesting that even though there is a construction recession, the cost of building a house has increased by 1.5% in the past year. I note that the government still hasn’t reversed the €1 cut to the minimum wage. I wonder will more competitive reforms bring the cost of building down substantially and more in line with our neighbours across the Border.
DKM estimate of new construction 2010 – http://www.irishtimes.com/newspaper/finance/2010/0626/1224273362280.html
@Brian 15% was profit before offsite overheads and tax.
@Brian….. Of course this profit element was eaten into if the developer overpaid for the site i.e. paid 20% rather than 15% of the sales price of the end product (net of VAT)
NWL
As you suggest, it makes little economic sense to purchase a newly built home just about anywhere. Too bad you do not have access to current statistics like those below. One must go back over 50 years in the US to see so few new homes built. I am sure Ireland has had an even greater decline in new home sales.
[…] may be interested in reading a recent entry on here which examines building costs in Ireland and compares Northern Ireland with the Republic. The […]
Thank you for the effort of informing us all out here in house insurance land.
With the way things are going |I am thinking of Not insuring !!!!
My house, built 1913 by my gradnfather was not insured for its firse 50 years of existance and had five fireplaces inn use !!!! It might be time again to not bother for a while and just be as carefull as my grandparents were in looking after it…..
I do not intend to pay premium for the Quinn group failings…
rgds
Jim Kelly……. jameswkelly@eircom.net.
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