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.