The latest report from the Society of Chartered Surveyors of Ireland (SCSI) on apartment costs here perfectly encapsulates the circular nature of Ireland’s housing problem.
The only way we’ll get housing supply up to the 50,000 units-a-year mark, the Government’s target rate, is to build higher-density housing, including apartments.
But if the average cost of constructing a two-bedroom apartment ranges from €480,000 in suburban medium-rise schemes to €650,000 in an urban development, as the SCSI contends, there’ll be few buyers and few renters.
To afford these apartments, a first-time couple requires a combined salary of between €108,000 to €146,000.
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It also means the Government’s Help to Buy and First Home schemes are unavailable because the sale prices of these units would be well above the €500,000 threshold required.
All of which means that these apartment schemes require institutional investors to bulk-buy the units as PRS (private rental sector) investment for high-end, city-centre rent, which most of the population can’t afford.
PRS investment seems to be a central focus of Government policy.
To enhance the viability of apartment projects, the Government has changed design standards, revamped rent controls and reduced VAT on new-build apartments.
These measures do seem to be enticing more investment into the sector judging by the latest planning permissions data, which indicated a 50 per cent jump in permissions for apartments in the third quarter.
But it remains to be seen if building high-cost apartments will do anything to square the affordability circle at the heart of the country’s housing challenge.
It’s hard to keep applying the term crisis to the problem when it’s been going on for the guts of 20 years and when the home ownership rate among those aged 25-39, once considered a prime homeowning age, has dwindled to such an extent.
The declining rate of home ownership has created an oversubscribed rental market, which these new apartments will presumably feed, with rents seemingly on an inexorable path upwards. It’s a vicious circle.
