Dublin is second most expensive city in Europe to build apartments

Dublin is the second most expensive city in Europe to build apartments, according to a new report. The survey of construction costs, compiled by the Society of Chartered Surveyors Ireland (SCSI) and Trinity College Dublin, found the cost of building an apartment in Dublin was €2,363 per square metre, just over €300 higher than the average across 10 cities assessed in the report.

The Irish capital was eclipsed in cost terms only by Zurich in Switzerland, where the cost per square metre was €2,866.

It was more expensive, however, than Manchester (€2,238), Stockholm (€2,155), Glasgow (€2,123), Amsterdam (€1,824) and Brussels (€1,804). The Estonian capital Tallinn was found to be cheapest at €1,367 per square metre.

The figures contained in the report refer to the first quarter of 2020 before the pandemic and the recent energy price shock, both of which triggered a major increase in construction costs.

Perhaps the most surprising finding was that Belfast, the second largest city in Ireland, was ranked as the second cheapest location to build apartments, with the cost per square metre put at €1,755.

The disparity between Dublin and Belfast may be partly explained by the zero VAT rate applied to construction in the UK.

“If VAT rates were zero Dublin would rank as the fifth most expensive city, with a cost similar to the British cities included in the survey,” said Bryn Griffiths of the SCSI, one of the report’s authors.

The report, which uses the International Construction Management Standards system to compare construction costs across cities, includes the so-called “hard costs” of construction (the bricks and mortar element) but not all of the so-called “soft costs” of construction. Soft costs such as land, financing and developers’ margins were excluded because of the different rules and norms that applied between jurisdictions.

The report used a typical block of 39 apartments over seven storeys, most of which were two-bedroom apartments, as its benchmark. It found that average structural and non-structural costs plus services and equipment made up two-thirds of the cost of an average apartment.

While Dublin was marginally cheaper than the typical city for structural works, including those involving concrete, the city’s high overall cost was due in the main to the relatively high cost of services and equipment, which includes heating, power elevators, and non-structural works, which covers things like floors, windows and carpentry.

The more expensive cities such as Zurich and Dublin tended to be more expensive “right across the board”, Mr Griffiths said.

Ronan Lyons, associate professor of economics in Trinity College Dublin, who co-authored the report, said the findings highlight the challenge of high construction costs in Dublin in particular as a barrier to new housing supply.

“For some time we have known that Dublin is an expensive place to build housing, with costs per square metre high compared to peer locations. This is something that has affected the ability of the housing system here to build the volume of homes needed. This report is the first to break down that high-level figure into the different components that go into building a home.”