Mr. Mel Reynolds:

I cannot speak for anyone active in the market. All I can do is see what is in front of me. With regard to the build costs, it is useful to look at the Ó Cualann housing project. It has sales prices. It is building apartments and houses on a site in county Dublin. If it gets a site, for example, at €1,000 per unit - its infrastructure cost is a little bit high at about €4 million - it can build, make a profit and sell a two bedroom apartment for approximately €185,000. It can build and sell a three bedroom house at €219,000, including VAT. With regard to the State, the value of the site in Ballymun is €18,000 but Dublin City Council is giving it to the end user for €1,000. Each three bedroom house, however, is charging €26,000 in VAT that goes to the Exchequer. The units are pretty much cost neutral.

Depending on what way the land market goes with regard to site values, if this was brought in and had an adverse effect on site values then it is good because instead of a builder buying a site at €200,000 per unit and having to sell the house at €600,000, the builder might be able to buy a site at €50,000 per unit and sell at €450,000 or lower. Once there is a margin for a builder to do it, he will do it. He can buy and sell for €400,000, €600,000 or €250,000 once there is a margin there. It is all about the land value. Land values in Dublin city currently are about €10 million per hectare based on an average density of 90 units per hectare. It is about 110 or 120 units. Dublin City Council values its land at about 80 units per hectare. If Dublin City Council was to build out at cost and sell to try to claim back its full land value, it would not be in a position to sell at affordable rates. The land subsidy is critical to any affordable or rental scheme. One just cannot do it at the current market rates.

With regard to profits, if a person entered the market in 2012 or 2013 he or she would pay no capital gains tax and would have seen a 400% or 500% increase in the land asset. If that person gets a hit at the back end, or a slap on the bum on the way out, with a 20% levy he or she will not like it but is still way ahead of the posse. The next person coming in may be looking at buying the site significantly cheaper. It is swings and roundabouts, but at the end of the day, one really needs to see land values reduced to a point where they make some sort of sense. The worrying aspect from the private sector perspective currently, and valuers are telling me, that the standard way of valuing which is the red book value of a sales price and a residual land value is no longer relevant in many locations. This suggests that the market value is way over where it should be.