Increasing Part V S&A requirement to 20% may add at least €8k to the price of a starter 1,100 sq ft home
With news that proposals are going to Cabinet in the coming weeks to mandate builders to provide 10% of new developments to local authorities as social homes, and a further 10% as affordable housing the impact will be to increase price of homes for private purchasers (as required return on a project would then have to be achieved from selling a smaller number of units for sale to private purchasers). The scale of impact will vary but for a typical standard 2 bed apartment in an SHD type development this could add €9.5k (+2%) to the required sale price (with the average cost for a LA to purchase a 2-bed unit in such a development being €360.4k). For a 3-bed house the required price will increase from €338k to €346k (+2.5%).
With residential development closed down since January (in addition to the 2020 lockdown) the financial hit is significant. To put in perspective - the delay to Oakmount Groups development of 48 apartments in Dublin may add up to €0.5M to their project costs. This is approximately equivalent to the revenue from one unit and adds over 2% to project costs.
The picture is the same for commercial development with projects stalled and no return to site date in place. With such uncertainty around delivery date this impacts on a developers ability to get a tenant in place. Further delays will make a bad situation worse. The example below illustrates the impact on Valorem Investment Partners project on Newmarket Square, Dublin 8.
Keogh Consulting looks to help individuals and organisations deliver the right projects the right way. Here is some of our knowledge and a few case studies that we hope will help you on your project journey.
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