In a previous post “House building costs are 17% more than 2003 despite recession” it was suggested that when VAT, SI.9 costs and developer’s profit is added, the sales price of a typical 125 sq.m. house is currently in the region of €300,000 excluding the site purchase costs.
Typical site values for houses in the country would suggest we are well over €350,000 when the site cost is taken into account. As the average sales price for a typical house is in the region of €250,000, this would suggest that it is still cheaper to buy than to develop.
Here is a breakdown of these figures. In an earlier post we noted an architect’s assessment of additional SI.9 costs for a typical house (see below). The following calculation was confirmed by a development finance specialist and a builder-developer as being an accurate assessment of the cost of a speculative house in a larger scheme. We note the developer suggested cost savings may be made on the administration of the new building regulations by availing of the pilot HomeBond scheme.
Here is the breakdown received:
Developer-Led projected Sales Price for a Typical House
Base build cost= €1271 x 125 = €159,000
plus 13% for professional fees (+€20.7k)*= €180,000
plus SI.9 Professional + specification Costs (+€21k)*= €201,000
plus legal, marketing, sales and other costs of 5% (+€10k)= €211,000
plus developer’s net sales profit of 20% (+€42.2k)= €253,000
plus vat @ 13.5% on sales (+€34.2k)= €287,000
plus planning levies (+€10k)= €297,000 Projected sales price
(The above cost calculation excludes site purchase costs.)
- Bruce Shaw cost range for new build €1000- 1250 per sq.m. (av. €1125) excluding VAT. It recommends adding in 13% for additional development costs= €1271 per sq.m. Exceptional or once-off site development or infrastructure costs may be higher.
- For the purposes of this calculation we will assume a typical 3-4 bed house size is 125 sq.m.
- Once-off individual sites will be higher in urban areas like Dublin, Galway or Cork.
- The costs exclude upgrades due to increased performance (Part L etc) required to reach net carbon zero targets, and other changes to regulations.
- The costs exclude 10% social and affordable costs [Part V] recently introduced. This will likely result in higher site costs and consequent higher sales prices.
- The following calculation excludes site costs. Assume average site prices of between €40,000 up to €80,000 per house for larger sites excluding VAT. Profit normally would be factored onto sales price so following calculation is at lower end of estimated costs.
This cost, along with other factors such as availability of finance, may well be determining the pace of residential supply currently.
The average house sales price nationally is around €250,000. The above calculation suggests that it is still cheaper to buy than build notwithstanding recent increases, and will remain so until sales prices increase significantly (or the cost of building is lowered).
One can see that the additional cost of the new regulatory red-tape bureaucracy is €21,000 when VAT is added (consultants fees plus specification costs). Developer’s profit is at €48,000 when vat added on to consumer. The cost in the base-build use a main contractor is in the region of €21,000 incl. VAT. So the additional costs to a self-builder in buying a speculative built house when vat, SI.9 costs and developer’s profit is added, is in the region of €90,000. An additional 30% cost increase.
If the government adopted incentives, like in the UK co-housing initiative, to stimulate the self-build sector and reduced regulatory costs with the introduction of a low-cost independent inspector system similar to the UK, the cost of once-off housing could be significantly reduced.
*Breg Blog note: for additional SI.9 costs for a typical house see below
Other posts of interest: