Blog 27_ Price Fixing

"For those Studio Apartments on reclaimed land off Fairview in Dublin, you suggested a price of EUR 150,000. How did you come up with that price? Wouldn't the construction of those apartments be subject anyway to the same constraints as the Government's own Housing For All plan, namely, Planning delays, lack of Manpower, Infrastructure delays, etc."?

Let's take the second part first. In relation to infrastructure, what I'm suggesting is that providing a couple of large sized connections to a single site within the Dublin City boundaries is far easier for the utilities like Uisce Eireann, ESB networks etc, than it would be to provide hundreds of smaller sized connections to geographically dispersed locations. Similarly, for planning, there would be just one planning application to be processed rather than hundreds of individual applications for smaller sites. The lack of manpower doesn't arise because the construction project is being combined with the building of a sea wall to protect the north side of Dublin city from climate change induced flooding due to increased frequency of storm surges and sea level rise in the years ahead. There are a limited number of international companies that do this very specialised reclamation work and they typically bring their own experienced staff who live on board an anchored ship for the duration.

Turning to the sales price of EUR 150,000, I'm taking it as a net price under the Government's Help to Buy scheme. According to the present rules, purchasers can avail of up to a 10% rebate of income tax subject to a max of EUR 30,000. While the cost to the owner occupier is still EUR 150,000, it allows the actual sale price to rise to EUR 167,000. A Studio apartment for that price is not that unusual, even in the big cities of the western world; the Bronx, in New York is a case in point. A simple google search will turn up several Studio apartments, converted lofts, etc for sale at that and even for slightly lower in the Big Apple.

As an input to detailed cost calculations for the Studio apartments I'm relying on the data in the Total Development Cost Study published by the Department of Housing, Local Government and Heritage in September 2024 which details the costs to a private developer in constructing a range of different building types.Taking two figures from that study; that for Case Study #3 - Urban 2 bed apartment and that for Case Study #4 - Purpose Built Student Accommodation (PBSA); the construction cost of the Studio apartments will be much closer to the figure for PBSA (EUR 203,000) than to the much larger two bed urban apartment (EUR 592,000). Note: all figures are rounded.

The PBSA units in the case study are 30 sqm each but we can add another 7 sqm for a share of the common space so 37 sqm in total. By comparison, Studio apartments are 49 sqm each so an ajustment for that will be necessary.

The total development costs are split into Hard Costs (actual construction costs) and Soft Costs (everything else) - for PBSA it's almost a 50::50 split. Dealing with the soft costs firstly, let's see what we can take out as irrelevant to a state commissioned project. Land is 15.73% of total cost and in this case since we propose using the Infrastructure, Climate and Nature fund to build a protective sea wall (a valid Climate measure) and reclaim new land, so the land cost is actually zero. Finance costs are 9.48% but since this is Government funded (or seed funded if the apartments in each block are sold upon completion) this is also zero. We can take out Sales and Marketing costs at 2.35% also and assign that job to an existing Governement department or agency. That comes to approximately a 28% reduction in costs. Hence our starting price is reduced by this percentage leaving a cost of EUR 146,000 per 37 sqm PBSA apartment. Pro rata then the preliminary costing for a 49 sqm Studio apartment is EUR 193,000.

Next to tackle the Hard or Construction costs portion. The cases in the Development study are for the construction of a home in a single block - a 58 unit block in the 2 bed apartment example and 121 units for PBSA. Our situation is different which will help to lower the hard costs. We are proposing the construction of multiple identical blocks each containing 120 Studio apartments. This kind of project is ideal for using what are called Modern Methods of Construction (MMC). MMC speeds up construction and lowers costs. There are a whole range of techniques used but to give one example which involves the use of off-site construction - bathrooms: 120,000 bathrooms will be constructed off-site by multiple suppliers and then brought to site and lifted into place and connected up. MMC can save anything from 10 - 40% on construction costs but I am taking 25% as typical. Applying this as a reduction to the Studio apartment hard cost element reduces the total construction cost to EUR 168,000 which is the sales price suggested (allowing for rounding).

With a community of up to 50,000 people living in this new Dublin quarter, a large amount of Retail and other services will be necessary: Supermarkets, restaurants, cafes, bars, hair dressers, pharmacies, gyms, creches, etc. All of these will be accommodated using the Ground Floors of each block. There is already a contingency of 3.32% built in to the Soft costs of the construction but the proceeds from the sale of this commercial property could be used as a second contingency in the event of any shortfall, in order to assure the EUR 150,000 sales price for the Studio apartments.

The Case Study#2 two bed apartment price includes the provision of a single car parking space for each apartment in the basement. There is no such allowance in the case of these Studio apartments. There will be some parking spaces provided in the basement of each block as these are essential at least for people with mobility issues but, they will be sold separately (price to be determined later). Many owner occupiers may decide that, living essentially within walking distance of the city centre and with Bus, Dart and Luas on their doorstep, they don't need to own a car and might prefer to use instead something like the GoCar car sharing service or Yuko click and drive, as needed. It is anticipated that a Dublin Bikes station will be accommodated on site with Bleeper and Moby Bikes also available.

In modest sized apartments storage is always an issue so, a shipping crate sized and locked self storage unit with power will be available for each resident in the basement, taking up space not utilised for car parking.

This studio apartment proposal, while Dublin centred, has the potential also to radiate its effects outwards into the surrounding counties as these homes may suit some who currently are forced to travel long distances to work etc., due to the shortage of affordable accommodation in Dublin. Plans are expected shortly from Cork, Limerick and Galway which, if funded and executed on, are expected to address the housing crisis in each of those cities and surrounding areas.