The findings are part of a new report released by The Society of Chartered Surveyors Ireland
€330,000 is the average cost of building a three bedroom semi-detached house in Greater Dublin, according to a study published by the Society of Chartered Surveyors Ireland (SCSI).
The report entitled The Real Cost of New House Delivery 2016 found that the cost of building a new house come in at €45k higher than the average asking price of a similar house in Dublin.
The actual cost of building the house – known as the hard costs or construction costs – is less than half of the overall cost. That figures comes in at €150,000 just 45% of the total.
The soft costs, including VAT, professional fees, and levies come to 55% of the total cost at €180,000.
The breakdown of soft costs is as follows:
The report is based on a detailed study of eight live building projects in the Greater Dublin Area, where chartered quantity surveyors were employed as independent cost consultants.
Micheal Mahon of the SCSI said it may come as a surprise to those outside the industry to see that the actual construction costs or hard costs made up less than half of the total costs.
He said the report highlights a number of pressing issues, particularly on the soft cost side, which require urgent and focused attention from Government.
“We need to kick-start housing supply as soon as possible and to accelerate from the current output of 12,000 units per annum to the 25,000 units which is required”.
The report also includes a case study of a couple to highlight the stark reality of the current housing situation.
According to their calculations if both were earning the average industrial wage of €37k, they would still end up €36,000 short of the costs associated with building a house.
Based on Central Bank rules the couple would require a deposit of €35,000 for a three-bed semi costing €285K.
With a combined income of €74K and using the permitted maximum multiplier of 3.5 times salary, the maximum loan amount they could draw down would be €259,000.
This would allow the couple to purchase a property up to €294K which is €36,493 short of the current total cost of providing a new house in the Greater Dublin area.
In response to the study Mahon said "It is clear there is a serious financial viability issue and it's difficult to see how developers can it is difficult to see how developers can commence building in this market with particular emphasis in urban areas where the demand is highest but where land prices are also at their highest."
"Unless a balance can be found between the cost of providing housing and sustainable borrowing levels, the supply of new units will remain challenged".
Speaking to Newstalk Lunchtime this afternoon, Mahon said they will be focusing on other areas in Ireland in due course.
The society has made a number of recommendations to reduce the costs.
These include cutting the VAT rate to 9% - similar to the rate introduced for the hospitality sector, reducing development levies to €1,500 in line with Northern Ireland, and the setting up of a development bank for constructors that could borrow at government rates.
Other proposals suggested are aimed at increasing the supply of land.
The society says a variety of measures are available to our policy makers to ensure that land is made available to facilitate the supply including taxation measures, an earlier introduction of the Vacant Site Levy and a more progressive approach by Local Authorities to lead on the provision of infrastructure and services to locations where housing need is most acute.
SCSI has also developed an online calculator to demonstrate the impact that each soft cost factor has on overall total. The calculator will allow policy makers, members of the SCSI and industry analysts to consider the effect of altering any of the cost inputs in real time with real results.