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 Post subject: IT: Independent audit of house-build costs on way
PostPosted: Thu Nov 17, 2016 10:56 pm 
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Too Big to Fail

Joined: Jun 25, 2006
Posts: 3233
According to The Irish Times (17th Nov 2016), Minister for Housing Simon Coveney TD, has instructed the Housing Agency to benchmark the cost of building new housing developments in Ireland against our European cousins.

http://www.irishtimes.com/news/politics ... -1.2872771

As mentioned in the article, earlier this year The Society of Chartered Surveyors Ireland suggested the cost of building a 3 bed to current specifications as part of a development in Ireland today is €300,493.

https://www.scsi.ie/resources/2016/pdf/ ... ivery_2016

That compares to a 2012 report by one of their members on behalf of the Irish Home Builders Association which stated the cost to be €197,080 ex site (using the SCSI cost of just under €60,000 for the plot works out at about €257,080)

http://www.walsh-associates.ie/wordpres ... y-2012.pdf

Blue Horseshoe

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"Housing traditionally is not viewed as a great investment. It takes maintenance, it depreciates, it goes out of style". "So, why was it considered an investment? That was a fad. That was an idea that took hold in the early 2000's. And I don't expect it to come back. Not with the same force. So people might just decide, "I'll live in a rental." That is a very sensible thing for many people to do". Prof. Robert J.Shiller, Nobel Laureate in Economics, Feb 2013.


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 Post subject: Re: IT: Independent audit of house-build costs on way
PostPosted: Thu Nov 17, 2016 11:22 pm 
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Of Systemic Importance

Joined: Nov 4, 2011
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Location: SthDub
Another report/study XX


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 Post subject: Re: IT: Independent audit of house-build costs on way
PostPosted: Thu Nov 17, 2016 11:47 pm 
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Under CAB Investigation

Joined: Apr 30, 2013
Posts: 1648
The issue is not build costs - it is cost of land (which is very f**ked up in Ireland).

1. The €124 per sq ft (ex VAT and Fees) from SCSI for core build costs is bang on for decent quality suburban estate houses (nothing plush but very solid / not excessive glass).

2. The €77 per sq ft (ex VAT and Fees) from Walsh Associates is for a chipboard lower quality estate house you can find out of Dublin (and regretfully sometimes in Dublin).

* * * * * *

Stephen Donnelly has shown that on the Dublin Commercial Real Estate end, the Dublin Prime Office Cost of Build (also ex. VAT and Fees) at €200 per sq ft, is bang in line with Eurozone averages.

TURNER & TOWNSEND: EUROPEAN PRIME OFFICE CORE BUILD COSTS
Image

The issue is cost of land in Dublin, which is why Dublin Commercial Office prices are 6.4x Dublin Prime Office Cost of Build.

Their highest multiple in their history, even 2007 (and 2nd highest in Eurozone):

KNIGHTFRANK: GROSS PRIME OFFICE PRICES VS. COST OF BUILD
Image

* * * * * *

While Stephen Donnelly focuses on Dublin Commercial Prime Office, it is the same story for Commercial Prime Retail, and the same story for Suburban Office and Retail etc.

A key driver of skyrocketing Commercial prices is that FG has made Commercial real estate tax free for foreign institutional Landlords. FG started doing this in 2012 (by stealth with QIAIFs and Section 110 SPVs), but will solidify it in the 2016 Finance Bill (don't be fooled by their 20% IREF tax, very few institutional Lamdlords will be paying it).

Because FG made Irish Commercial property fully tax free for foreign investors (income and capital gains), they have pushed up main Irish city land prices to levels where Residential property is not attractive to build.

Owners of land are therefore hoarding it (why NAMA haven't sold Glass Bottle Site)

Even where there are well built city Residential Apartments, foreign institutional investors are also bidding them up to bloated levels, as they can export the Irish rents, tax free, to offshore.

This is FG's Landlord Nirvana. Great for the 1% (who own land). Not for the rest.

* * * * * *

Discussed more fully (with Stephen Donnelly's submissions) on this thread:

DUBLIN COMMERCIAL PROPERTY BUBBLE, FG LANDLORD NIRVANA, IREFs
http://www.thepropertypin.com/viewtopic.php?f=4&t=66479


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 Post subject: Re: IT: Independent audit of house-build costs on way
PostPosted: Fri Nov 18, 2016 12:16 am 
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Property Magnate

Joined: Oct 11, 2012
Posts: 692
observer35 wrote:
The issue is not build costs - it is cost of land



Is it? Maybe for commercial property. But according to the report quoted above, the site cost in a typical 3 bed comprises 17% of the total retail price.


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 Post subject: Re: IT: Independent audit of house-build costs on way
PostPosted: Fri Nov 18, 2016 12:29 am 
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Under CAB Investigation

Joined: Apr 30, 2013
Posts: 1648
mortgageboy wrote:
observer35 wrote:
The issue is not build costs - it is cost of land



Is it? Maybe for commercial property. But according to the report quoted above, the site cost in a typical 3 bed comprises 17% of the total retail price.

The build costs are right in the reports (esp. first), the land costs are way too low for major Irish cities. In most Dublin, the land cost is AT LEAST equal to the core cost of build (and much higher, as you come in from the suburbs). The reason why the land cost is so high in the core cities, is the tax free driven bubble in comercial property prices.


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 Post subject: Re: IT: Independent audit of house-build costs on way
PostPosted: Fri Nov 18, 2016 12:30 am 
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Homeless

Joined: Nov 13, 2016
Posts: 13
observer35 wrote:
The issue is not build costs - it is cost of land (which is very f**ked up in Ireland).

1. The €124 per sq ft (ex VAT and Fees) from SCSI for core build costs is bang on for decent quality suburban estate houses (nothing plush but very solid / not excessive glass).

2. The €77 per sq ft (ex VAT and Fees) from Walsh Associates is for a chipboard lower quality estate house you can find out of Dublin (and regretfully sometimes in Dublin).

* * * * * *

Stephen Donnelly has shown that on the Dublin Commercial Real Estate end, the Dublin Prime Office Cost of Build (also ex. VAT and Fees) at €200 per sq ft, is bang in line with Eurozone averages.

TURNER & TOWNSEND: EUROPEAN PRIME OFFICE CORE BUILD COSTS
Image

The issue is cost of land in Dublin, which is why Dublin Commercial Office prices are 6.4x Dublin Prime Office Cost of Build.

Their highest multiple in their history, even 2007 (and 2nd highest in Eurozone):

KNIGHTFRANK: GROSS PRIME OFFICE PRICES VS. COST OF BUILD
Image

* * * * * *

While Stephen Donnelly focuses on Dublin Commercial Prime Office, it is the same story for Commercial Prime Retail, and the same story for Suburban Office and Retail etc.

A key driver of skyrocketing Commercial prices is that FG has made Commercial real estate tax free for foreign institutional Landlords. FG started doing this in 2012 (by stealth with QIAIFs and Section 110 SPVs), but will solidify it in the 2016 Finance Bill (don't be fooled by their 20% IREF tax, very few institutional Lamdlords will be paying it).

Because FG made Irish Commercial property fully tax free for foreign investors (income and capital gains), they have pushed up main Irish city land prices to levels where Residential property is not attractive to build.

Owners of land are therefore hoarding it (why NAMA haven't sold Glass Bottle Site)

Even where there are well built city Residential Apartments, foreign institutional investors are also bidding them up to bloated levels, as they can export the Irish rents, tax free, to offshore.

This is FG's Landlord Nirvana. Great for the 1% (who own land). Not for the rest.

* * * * * *

Discussed more fully (with Stephen Donnelly's submissions) on this thread:

DUBLIN COMMERCIAL PROPERTY BUBBLE, FG LANDLORD NIRVANA, IREFs
http://www.thepropertypin.com/viewtopic.php?f=4&t=66479


Firstly Observer35, thanks for your posts on Apple and the REITs over the past couple of weeks. They've been a real eye opener. I've developed this simultaneous dread/joy when you post because it's always bad news but it's always interesting.

Secondly, I've a question about this bizarre tax policy. Who is pushing this inside government? I doubt most TDs could spell QIF never mind explain how they operate and you have said before that financial companies in the IFSC and the Big4 have serious clout when it comes to writing the Finance Acts. But surely there is a faction in the Department of Finance who have crunched the numbers and realised that this no-tax-for-non-Irish-investors policy is lunacy.

So who ultimately is giving the green light for this? The Dept of the Taoiseach or Noonan himself?


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 Post subject: Re: IT: Independent audit of house-build costs on way
PostPosted: Fri Nov 18, 2016 12:39 am 
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Property Magnate

Joined: Oct 11, 2012
Posts: 692
observer35 wrote:
mortgageboy wrote:
observer35 wrote:
The issue is not build costs - it is cost of land



Is it? Maybe for commercial property. But according to the report quoted above, the site cost in a typical 3 bed comprises 17% of the total retail price.

The build costs are right in the reports (esp. first), the land costs are way too low for major Irish cities. In most Dublin, the land cost is AT LEAST equal to the core cost of build (and much higher, as you come in from the suburbs). The reason why the land cost is so high in the core cities, is the tax free driven bubble in comercial property prices.


I don't dispute what you're saying about commercial property, and I recognise that land cost is a significant factor in prime residential locations. But is there a strong correlation between commercial property/land prices and residential? There aren't too many places where there is a choice between two types of development.


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 Post subject: Re: IT: Independent audit of house-build costs on way
PostPosted: Fri Nov 18, 2016 12:57 am 
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Under CAB Investigation

Joined: Apr 30, 2013
Posts: 1648
When you need to make real inroads into a housing deficit, you need big developments of high quality large sized apartments in core city locations. All of these fight with Commercial property for land use (office, retail, hotels etc). These are how most major Tier 1 cities solve their housing problems. Irish major cities have a ridicously low density in high quality apartments (especially so for an economy targeted at multi national services focused / thus office based business).

Your next option is the few large multi acre sites that sit in suburbia on which you can still build dense housing / townhouses / low rise apartments. Again, these sites are being hoarded (even by NAMA) as the owners are waiting for suburban Resi prices to match surburban Commercial prices (they have seen this catch up before in the naughties when Irish banks dramatically increased the credit given to Resi buyers to facilitate the catch up).

Even on far out big sites like Cherrywood in south Dublin, a large critical mass of commercial office and retail will need to be built to make the sums work given what was paid for the land.

That is the problem with our Resi crisis - you need big sites, and big density on those sites, to solve it.

... And many of those type of situations compete with Commercial property.

... Whose values are bloated by FG's zero tax policies.


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