Monday 21 May 2018

Government levies now make up 20pc of the cost of buying a new house

GOVERNMENT levies make up 20pc of the cost of buying a new home.
GOVERNMENT levies make up 20pc of the cost of buying a new home.

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GOVERNMENT levies make up 20pc of the cost of buying a new home.

The Society of Chartered Surveyors (SCS) said that between development levies, the cost of providing affordable housing and Vat, the Government recoups almost €28,000 from the sale of an average three-bedroom house.

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The figures were revealed as the Housing Agency warned the high cost of building must be tackled to make housing more affordable, reduce costs for buyers and renters and bring about a stable market.

The agency said as much as a quarter of average household income was spent on housing, and that costs must be reduced for Ireland to remain competitive.

Chief executive John O'Connor also said developers had to begin building homes for prices the market could afford, rather than what they could fetch.

This consideration is key in light of changes to mortgage-lending rules, where a maximum of 3.5 times household income can be borrowed to fund a house purchase.

The changes are expected to reduce the amount people can borrow - a couple on a combined income of €75,000 can now borrow some €262,500, almost €100,000 less than under the 'old' rules, meaning many in Dublin and Cork city will be priced out of the market.

Mr O'Connor said there was a need to examine building standards to see if they were higher than required, and changes to how we construct units, to reduce costs.

"We want housing that people can afford. We can't just build Rolls-Royce or Mercedes," he said. "Developers don't think about what the market can afford. They think about what they can sell for. Other countries are cheaper. Often there are plainer buildings, where a lot of construction is fabricated off-site. We need to be more pragmatic."

The most recent figures from the Central Statistics Office show that housing costs have rocketed in recent years, and that we now spend more on our housing needs than on food.

In 2004-2005, the proportion of total household expenditure that related to housing stood at 12pc. That rose to 18.2pc in 2009-2010, the last year for which figures are available.

Affordable

An analysis of building costs for the Irish Independent by the SCS said that a three-bed unit costs around €130,000 to build, excluding land costs, but that Government taxes and levies add almost €28,000. In all, the State's take on a home is 17pc, rising to 22pc in Dublin.

SCS vice-president Andrew Nugent noted that Vat was not imposed on home purchases in the UK, which helped keep prices more affordable..

"One proposal we have to stimulate house building is to reduce Vat to 9pc. But Vat is just one cost. Development contributions is another issue which drives up the cost of a house. Compliance with higher standards, such as insulation ,adds to costs and which should be reviewed.

"There's a lot of regulations introduced without having been fully costed without the impact on the consumer being calculated. Can the market bear those increased costs?"

The Housing Agency is examining construction costs, while Housing Minister Paudie Coffey said development levies would be reduced to help encourage construction.

However, this will give rise to questions on how key infrastructure such as water and roads are funded. "There is quite a high tax take on the Government side, which is why we're addressing development charges," the minister said.

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The Residential Land Availability Survey map was created by drawing together zoning maps held by each local authority in the State.

Developed by the Department of the Environment, it sets out individual plots of land in towns, villages, cities and rural areas, and indicates the number of homes permitted on each site.

It took almost two years to develop, and provides planners and developers with an overview of the available land for housing.

It does not include land zoned for mixed-use development, which would generally include some housing provision. Nor does it include derelict sites.

The data is based on the situation as of March 31 last. Stage 1 land is considered not viable for development in the short-term because necessary services such as water are not in place. Stage 2 land has no major constraints. Not all the land has planning permission.

The Construction Industry Federation said that many local authorities were pitching their levies at "boom-time levels", which needed to be reduced. It claimed that in some parts of the country they were as high as €70,000 per unit.

Irish Independent

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