‘Serious’ viability issues for property developments outside Dublin

There are “serious” viability issues for property developments outside of Dublin, a leading property developer has said.

Speaking to The Irish Times, Cork-based developer Michael O'Flynn said there are difficulties with building outside of Dublin because of high costs.

“I would be concerned about the regions . . . I think the regions are really struggling and I think the regions in this country need special attention otherwise we will have two Irelands.

“People need to get away from ‘the builders run away with the VAT’, because it’s a viability issue. If we had lower VAT we would have much more chance of bringing forward more schemes,” he said.

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Mr O'Flynn was speaking in the aftermath of comments from a senior civil servant who said major economic shifts out of Dublin into regional Ireland are not realistic given Dublin's economic momentum.

Speaking at the Property Industry Ireland (PII) annual conference, Niall Cussen, a principal adviser at the Department of Planning, Community and Local Government, said Ireland had "a lot of rural development challenges" but he noted that "major regional shifts are not really realistic".

Planning framework

Mr Cussen was commenting after the launch of the Government’s national planning framework which forecasts the necessity for an extra 500,000 homes by 2040.

Also speaking at the conference, Damien English, the Minister for Housing and Urban Development, said the Government expected 19,000 houses to be completed by the end of this year and a further 23,000 houses to be finished by the end of 2018.

Mr O’Flynn said these projections were not realistic and predicted a static level of supply in the absence of significant Government intervention.

“Unless the Government is going to take some real proactive steps the housing supply situation is not going to increase as required.

“We need to deal with viability, the cost of land, we need more infrastructure and we don’t want to drive wages up to pay for a higher-priced product. We need to bring the product price down,” he said.

Forecasting an upward pressure on prices for at least the next year, Mr O’Flynn also criticised the Government’s lending rules whereby individuals can get a mortgage for 3½ times their salary.

While the PII didn’t criticise the lending rules, the organisation called for retention of the help-to-buy scheme until the end of 2019, a review on local-authority financing, the establishment of a rent guarantee scheme and a sale by the Government of any State or semi-State holdings which are not currently fully utilised.

"We continue to face a situation where the demand for accommodation remains significantly higher than the speed of new homes being built. That is only set to continue as our population increases," PII director Dr David Duffy said.