The chief executive of Irish housebuilder Cairn Homes has welcomed the Government's Help-to-Buy scheme for first time buyers, saying it represented the the best way to stimulate construction in the short term.
"We are the middle of a housing crisis and, while there are issues with costs, we have to look at what will be impactful," Michael Stanley told The Irish Times.
“The big challenge we are seeing is the ability of first time buyers to put a deposit together, post tax, of €30,000 to €40,000. It’s a challenge for people. So this will help with that.”
Minister for Finance Michael Noonan announced a rebate of 5 per cent for first time buyers on house prices up to €400,000, and a maximum rebate of €20,000 for units priced up to €600,000. This will apply to new builds only.
Mr Stanley said that coupled with the Housing Action Plan provisions for fast tracked planning measures, and the Local Infrastructure Housing Activation Fund announced earlier this year, the Government was delivering on its promise to address the shortage of housing and to make buying a first home more affordable.
Cairn, which is listed on the London stock market, is currently active on five of its 27 sites in Ireland and plans to ramp this up to 10 by the middle of 2017. This will includes schemes in Adamstown, Greystones and Naas.
He said that while there is strong demand for new homes, “realisable demand” is muted due to a lack of “people with mortgages in their hands”.
Efficiencies of scale
Mr Stanley said a larger pool of potential buyers with mortgages would enable housebuilders to achieve efficiencies of scale by spreading the cost of materials and various fees across a larger number of units.
“It will allow Cairn to ramp up some of our developments and this will flow through to costs,” Mr Stanley said. “We will look at ways of increasing our output. This may allow us to build at a faster pace.”
Cairn’s current plan is to build 400 units in 2017, 800 in the following year, rising to 1,200 in 2019.
“We have the funding and the sites and we’re just going to get on with it now,” he said.
Mr Stanley said that while the pace of housebuilding might now pick up, apartment building is likely to remain constrained in Dublin due to the risks involved in deploying large sums of capital for such developments.
He cited how Cairn's Marianella development in Rathgar, which will involve the construction of about 200 apartments, required €35 million in capital to be committed before any revenues are achieved, and its site in Hanover Quay about €45 million.
“It’s very hard for traditional house builders to get stuck into apartment building...you need to charge €300,000 to €350,000 just to break even in the city.”
