The Croí Cónaithe scheme, which has had €450m earmarked for it over the next three years, is designed for the State to plug the gap between the cost of construction and the market value of apartments. It relates to certain areas where the sales price achievable is less than the costs of development.
Funding will be provided solely for build-to-sell developments with apartments to be sold to individual owner-occupiers rather than build-to-rent schemes. It is hoped that the initiative will kick-start apartment developments in unviable locations particularly for first-time buyers, single people etc.
A report titled ‘The Real Costs of New Apartment Delivery’ by the Society of Chartered Surveyors in January 2021 found that a typical urban apartment block of between five to eight storeys, could cost between €380,000 and €451,000 to build. The variance should largely consist of site value depending on location. Build costs at these levels are generally above the sales prices achievable for most locations throughout Ireland outside of prime Dublin residential addresses. These construction costs will have also risen significantly in the intervening period.
Such a scheme which would invariably increase supply and the mix of new residential units being supplied to the market should be welcomed by all stakeholders. However, the perception that developers will somehow benefit from the public purse will be a key criticism to counteract. An open book analysis of input costs for each participating scheme and a cap on developers’ profit may be one way to ensure a satisfactory outcome for the return on investment by the State.
Niall Brereton BSc MRCIS MSCI is a Registered Valuer and Director of Professional Services at Bannon