At a recent breakfast briefing in Cork organised by CIF Southern Region, Frank Ryan, Director with DTZ Sherry Fitzgerald, gave a presentation about the viability of new residential construction in Cork.
He set out his stall by saying the sales price for a new three-bed semi in Cork is €250 per sq ft. “Anything below that means you’re a busy fool,” he told the large gathering of CIF members and industry professionals.
He said the equivalent price for an apartment is €300 per sq ft, “which doesn’t include cost of underground car parking”.
Having worked in Cork for over 30 years, Frank said he had never seen anything like the current situation.
“We have companies like Apple phoning us, a commercial real estate office, complaining about the lack of housing for its staff.”
The issue is not zoning, it’s planning, he told the briefing. “There’s no joined up approach. Plus, the customer has changed, they demand quality without compromise.
“Compliance is the issue that will haunt this room,” he added.
Sales price
Drilling down to price, Frank said the minimum selling price for a typical three-bed semi-d (1,100sq ft) is €270,000. This includes VAT, price of land and profit.
According to the ESRI figures, Cork requires 2,500 new residential units every year. Last year just 1,100 were constructed, sais Frank. “In my opinion we need more than 2,500 per year.”
One-off houses account for 60% of that figure, which means that what Frank refers to as ‘production housing’ is at critically low level. Research shows that 70% of potential purchasers want a three-bed semi.
“The market is not working,” he said.
“Site cost is what I call an uncertain cost variable,” he added. “Any movement in that will have averse effect. If price goes above €300k the first time market is priced out.”
The key to selling houses is to enhance value, said Frank. “You need a quality finish, excellent marketing and correct compliance. You also need to build a showhouse.”
Removing customers’ nervousness about housing is the main aim.
Frank went on to say infrastructural deficits is a huge issue. “Councils need ot remove uncertainty. “We need a timeline for infrastructure projects that developers can work from.”
For apartments Frank says the sales price for 800sq ft unit is €230,000 with a net sale of €200,000. “There is a new market for single owners of an apartment block,” he said.
In wrapping up he said Cork needed 10,000 social housing units while development land has experienced a 20% price increase over the past year.
“Why is that?” he asked. “The market is clearly expecting something to happen.”
Speaking to The Irish Times on the same day as the CIF breakfast briefing, well-known Cork developer Michael O’Flynn criticised the mortgage lending caps.
He said that the cap “make no sense” in Dublin, where house prices are higher than the national average. “It needs to be €300,000 in Dublin,” he said. At present first time buyers have to save 10% of a mottgage up to €220,000, with many in the industry, like O’Flynn, saying this is unrealistic.
The income cap also came in for criticism. “In the UK the multiplier is 4½ times– why should it be 3½ in Ireland? In the UK they don’t have VAT, while we have 13.5 per cent. We have to look at the cost side and the time it takes to get planning.”
“It’s depressing how badly our sector was thought of and wrongly blamed for. I’ve fought for the industry because I believe in it. We have an enormous contribution to make but there’s almost a view that we shouldn’t be in the room to discuss the recovery strategies. There will no be recovery without developers.”
Our image shows Frank Ryan (right), Director DTZ Sherry Fitzgerald with CIF Director General Tom Parlon after the breakfast briefing