Michael Raggett, Managing Director, Raggett Homes, talks to CAROL TALLON about the challenges of returning to development after a decade off-site.
At the height of the market, Raggett Homes was one of the largest house builders in the South East Region. Between 2008 and this year the company, like the majority of homebuilders outside the Greater Dublin region, has not opened any new sites. However, Michael Raggett, Managing Director, Raggett Homes, is optimistic, but cautious about what lies ahead.
Discussing recovery in the housebuilding sector in the South East, he explains that the market is moving closer to a level of viability in some areas, but not all.
“For instance, we have a site in Athy, Co Kildare that is not at a stage of viability yet. Houses are selling at about €50,000 below cost. There is demand, particularly for starter homes, but it is challenging to make it work.
“In Kilkenny, we are looking at the upper end of the market, where families are trading up. In the starter home niche, new three-bedroom houses in Kilkenny need to achieve a minimum of €230,000, but that has to be tested yet. In the trading-up niche, houses can make €500,000 to €600,000. Demand in this niche is in small pockets but seems consistent due to years of pent-up demand. Families have outgrown their three and even four-bedroom semis, have paid down their mortgages, moved on in their careers and now have the financial capacity to trade up.” He says that up to recently, only two sites had been developed in Kilkenny over the past decade, one with nine houses and one with four.
“Recently, there is a development where 20 four-bedroom houses were sold off plans in the €390,000 to €420,000 bracket,” he explains. “There haven’t been many three-beds built in Kilkenny, Athy or Carlow for a long time, so it is difficult to measure the impact of the Help-to-Buy scheme in these regions.”
Improving Economy Lifting the Sector
He says the improving economy is lifting the sector and the lack of supply is driving up prices close to the level needed to be able to build again.
“Prices are rising, but they have to come back to a base level where we can produce a house. For a three-bedroom house, we would need to be able to achieve a minimum of €230,000, but this also depends on obtaining the site for a reasonable cost.”
A Lost Decade
Speaking about the lost decade in home building, he explains that Raggett Homes went back to basics over the past 10 years. “We were building one-off houses, extensions and refurbishment work for the Local Authorities in Carlow and Kilkenny. This type of work kept a lot of local building firms going. Building single houses is where our business started out in my father’s time. During the 1980s, we would have delivered 30 to 40 one-off houses every year.”
He says there is a perception that things are very busy, but that this is only true in
Dublin. “We recently acquired a small site in Kilkenny. We have received permission for seven four-bed homes, and we’ll start on this in the coming months. We have not been active on any of our sites since 2008. Later this year, we plan to go back to a part-finished site in Athy for the first time since 2008. It was for a scheme of 70 houses. We originally built 26 units. Of those, 10 were sold in the early days, with the remaining 16 sold throughout the bad years as we finished off the site to the point where it could be taken over by the residents and the Local Authority.
Testing the Market
“We are going to take a chance and test the market by building six houses to start with on this site. The site has a capacity for a further 150 units. At the moment, second-hand three-bedroom houses are achieving between €140,000 and €160,000 in Athy. This does not make building viable. However, we hope to attract commuters who have been priced out of North Kildare and South Dublin, given the proximity and infrastructure connecting Athy to Dublin.”
Looking to the immediate future Michael Raggett is optimistic, but this is with a note of caution. “We will target small but proven niches in the market for the moment as we await other niches to become viable.”
First published in Construction magazine May June 2018