First-time buyers in Cork City would need to earn more than €100,000 a year to afford a new two-bedroom apartment.
That’s according to a new report, commissioned by Cork Chamber and the Construction Industry Federation (CIF). They examined four apartment schemes.
The projected sales price of a new two-bed apartment in Cork City, the docklands, or suburbs ranges from €389,000 to €486,000, meaning that a first-time buyer would need an income of between €100,000 and €125,000 to afford such a home.
The report was produced by EY-DKM Economic Advisory and says the cost of construction of new apartments is not viable and is threatening future economic growth in Ireland’s cities. The physical or ‘hard’ costs of an apartment constitute 48% to 56% of the overall construction costs, while 30% of the total sales price of a new apartment goes to the State.
The report recommends 16 actions, including reducing Vat from 13.5% to 9% for a short-term period of two years.
As well as having to earn large salaries to afford such homes, the same buyers would also need a cash deposit of between €39,000 and €49,000 to secure a mortgage.
When looking at the viability of built-to-rent apartments, the report found that the average monthly rent would need to be €2,500 for a two-bedroom apartment in Cork City and €3,000 for a three-bed apartment, to ensure viability.
The report warned that immediate government action would be needed to address the shortage of affordable apartments in cities.
The Government’s Ireland 2040 project predicts Cork Metropolitan Area’s workforce will have grown by 65,000 by 2031.
However, both Cork Chamber and the CIF are warning that the ability to accommodate these new workers in a compact city will be challenging, until the viability issue is addressed.
“Ireland 2040 will not be delivered-upon, unless this viability gap is bridged, and we need immediate government action,” said Conor Healy, Cork Chamber CEO.
“We have to build apartments where prices reflect the reality of the salaries of the people living in them and the growing demand for city-centre living.”
Author of the report, Annette Hughes, director at EY-DKM Economic Advisory, said: “Our analysis shows that the housing supply shortage Cork is facing could present a major obstacle to future employment, economic growth, and FDI, as well as to regional tourism and the quality of life in Cork city and the wider region.”