Salary of nearly €90k needed to buy three-bed semi in Laois

A major new report has found that the average cost of delivering a new three-bedroom semi-detached house in a multi-unit scheme in the Midlands – which includes counties Laois, Offaly, and Tipperary - is €371,000.

Nationally it ranges from a low of €354,000 in the Northwest to a high of €461,000 in the Greater Dublin Area.

The report, which has been published by the Society of Chartered Surveyors Ireland (SCSI) found the national average cost of delivering this house type across seven regions by the private sector is €397,000, while the cost is €386,000 when the Dublin region is excluded.

The SCSI’s ‘The Real Cost of New Housing Delivery 2023’ report, which was launched recently at the SCSI’s national conference in Croke Park says the average cost of delivering a 3-bed-semi-detached home in the Greater Dublin Area (GDA) has increased by over €90,000 to €461,000 over the last three and a half years.

This is an average increase of 24% on the €371,000 it cost to build the same house in 2020 and an average increase of 39% since the SCSI published the first edition of this report in 2016 when the cost of building an average 3-bed-semi was €330,500.

According to the report, the increase over the last three years in the GDA has been largely driven by a rise in ‘hard costs’ – bricks and mortar – up 27% or €49K on average while ‘soft costs’ – land, development levies, fees, vat, margin – increased by 21% or €41K.

The SCSI says it undertook an extensive and detailed study of over 8,500 units in 80 development sites throughout the country, with development sizes ranging from small builds to larger developments.  The surveyors say it should be noted that the costs quoted are for 3-bed-semi-detached homes of 114 sqm in privately built multi-unit schemes, not one-offs or standalone houses.

Chartered Quantity Surveyor Micheál Mahon, one of the report's authors, said the impact of Covid and the conflict in Ukraine have been the main contributors to the increase in ‘hard costs’ over the past two years.

“‘Hard costs’, which includes house building costs, site works, and site development, ranged from just over €198,000 in the Northwest region to just over €228,000 in the GDA, representing approximately a 15% differential. The main hard cost drivers have been energy, fuel, and shipping costs. The cost of various building materials, particularly concrete, insulation, electrical and plumbing products, steel reinforcement, and timber products, also increased dramatically.  More below picture.

Pictured: New houses finished in Portlaoise on the Dublin Road in 2023.

“Nationally, ‘hard costs’ now comprise 53% of the total costs of overall delivery, while ‘soft costs’ make up the remaining 47%. However, in the GDA, this balance shifts to 49% ‘hard costs’ and 51% ‘soft costs’. While cost inflation has increased very significantly in recent years, recent SCSI surveys indicate prices are levelling off.

“’Soft costs’ range from approximately €156,000 in the Northwest region to just over €233,000 in the GDA. The primary soft cost drivers have been land costs, financing due to higher interest rates, levies and an uplift in the cost of professional fees. On a national basis, land and acquisition costs (per unit) equate to 13% of overall delivery costs on average.”

Viability

Using average market value data of new three-bedroom semi-detached properties across the various regions, the report assessed the financial viability of new home building in different parts of the country.  Financial viability is determined by subtracting market value from overall delivery costs. MORE BELOW.

The research shows that financial viability, on average, is most challenged in areas of lower market values.  The region where this challenge is greatest is in the Midlands region, where the average viability gap is €52K, followed by the Cork region, €50K and then the Northeast region, €45K. The two areas where the construction of a new 3-bed-semis is most viable on average is Galway and the Greater Dublin Area.  

Affordability

In the report, the SCSI also examined affordability from the perspective of a first-time buyer with an average combined salary of €95K taking out a mortgage with the support of the Help to Buy scheme. This analysis showed that the Midlands and the Northwest are the most affordable regions for purchasing a new home using averaged market value data. The most unaffordable regions to the average first-time buyer are the GDA region, Galway region and the Cork region.  MORE BELOW PICTURE.

The combined average combined minimum salary levels required to purchase a new 3-bed-semi-detached house in the Midlands, including Laois, is €87K based on an average 3.3 times loan to income limit. The corresponding figure for the GDA is €127K, in Galway its €115K while in the Northwest its €70K. The maximum first-time-buyers can borrow at is 4 times LTI, and in that situation the combined salary level figure required in the Midlands is €72K.

Recommendations

The President of the SCSI, Enda Mc Guane, said that the report recommends that more needed to be done to support modern construction, pause increases to connection charges and levies, and ensure the planning process is fit for purpose to de-risk development and bring down cost, which potential homeowners ultimately pay.

 The full report is available at  https://scsi.ie/realcost2023