Rising construction costs are jeopardizing new construction plans

Local authorities are concerned about rising construction costs and the impact of price pressure on the profitability of new homes.

Some councils say development is only feasible for certain builders, certain types of homes, or in a limited number of locations, considering costs, prices and risks associated with housing construction.

Builders said there was significant pressure on home development in regional cities.

This was announced by Cork County Council Sunday independent While it is still financially viable for developers to build new homes in the county after “recent market exposure through competitive bidding and direct deals with developers” in relation to the provision of public housing, the council is “concerned about ongoing construction inflation, which is driving pricing pressures.” at the local hardware store”.

Tipperary County Council recently commissioned an analysis of the housing markets in Clonmel, Nenagh and Thurles. The study and the “recently increased caps of €325,000 now supported under the First Home Scheme (FHS)” meant it was now financially viable to build new homes “of a certain size and type”. FHS is an equity ownership program created last July to help eligible first-time buyers bridge the gap between their mortgage, security deposit and the price of a new home, and provides financing for up to 30 percent of the property’s market value.

Councils in Tipperary, Kildare, Kilkenny, Waterford and Wexford all said increased material costs have been a factor in all housing projects over the past year, including social and affordable housing.

CSO data shows that the cost of building materials rose 16.2 percent last year. Steel prices rose 57 percent. Cement rose by almost 29.2 percent over the same period.

A report by building consultant Mitchell McDermott last week revealed that nearly 9,700 homes that have been granted planning permission in regional areas will likely never be built because they are not profitable.

Kildare County Council also said a shortage of greenfield sites “is depressing development” on brownfield sites, “which compounded construction cost challenges”. Brownfield development can result in additional costs associated with preparing a site for construction.

“The viability or non-viability of housing projects built by developers is highly dependent on a number of factors including but not limited to location, demand, site conditions/abnormal costs, house/unit type/specification and property cost,” added a Kildare spokeswoman added.

​A year ago, Leitrim County Council said it would not levy vacant lots on fallow land due to concerns about the feasibility of the development. However, the Council has revised this view.

“Leitrim County Council believes that building new homes is profitable for a limited number of private developers, depending on the fundamentals of their business and the nature and location of potential projects. This view is based on the recent commencement of the first multi-unit development within Co Leitrim in over 10 years and preliminary discussions of a further limited number of housing starts,” a spokesman said.

Most of the other councils did not comment or said that housing profitability was not a concern for them.

Conor O’Connell, director of housing and planning for the Construction Industry Federation (CIF), said cost pressures and challenges are problematic everywhere, as the cost of building a home has risen 20 to 30 percent since pre-pandemic times. The association previously called on the government to lower the VAT rate from 13.5 percent to ease cost pressures.

“Building costs are probably 45 to 50 percent of the cost of delivering a unit, so they have a very significant impact,” added Mr. O’Connell.

“We see the greatest challenges in rural cities, including those with a strong industrial base. In such cities there is not enough development.

“City-centre urban locations are overwhelmingly in need of housing, but providing them is becoming an extremely difficult task due to rising construction costs and overall delivery costs.”

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