Mr. Tom Parlon:

Finance is a major cost. When the industry got into trouble ten years ago, the problem was the ease of getting finance. Now it is a different story altogether. We did a survey recently and despite the chronic under-supply of houses, 63% of our builders mentioned their difficulty in securing finance. Senior debt is maxed at 60%. No matter how good one's standing with the bank is, it will only give a maximum of 60% for a project. Very often our members, after coming through ten hard years, do not have the balance sheet to fund much so they depend on mezzanine finance which is generally in double digit figures. It can be up to 15% or 16%. When that rate is blended it can be 8% or 9%. It is a substantial cost. The Government recognised this in the last budget and has talked about setting up home building finance Ireland, which will have a fund of €750 million. The details are being developed at the moment and we are in consultation on that. If it came on a hare's back it would not come quickly enough because the industry needs access to that finance.

Labour is a big factor. Generally across the board labour accounts for about 40% of the total cost of any project. In October a sectoral employment order was written into law by the Minister of State, Deputy Pat Breen. It provides a set standard rate for the different grades of skilled people across the country, which is good, and it means everyone has a level playing field. It provides for a 10% increase in the rates as well, which is a very substantial increase that the industry has to live with. It is adding to the costs. There is also a scarcity of workers now. Our unemployment rate has dropped substantially. The number of potentially skilled people within the ranks of the unemployed is scarce. There is a lot of competition for skilled people. That is adding to inflation.

Energy and transport costs are a factor. Unfortunately, the bulk of construction work is happening within the M50 and the greater Dublin area. Anyone who travels to and from the country, which I and many of the people around me do, will know there is a massive clogging of the roads with traffic. Much of that is made up of construction workers with their vans and tools and their gear coming to work in Dublin. That adds substantially to the cost. Many of our firms have to provide vans for people because they commute long distances. Unfortunately the option of living in Dublin is not a viable one. That is probably another major player.

Construction and demolition waste is the next cost. The new children's hospital is under construction.

The first part of this construction project involves the digging of a massive basement several storeys deep to accommodate services, plant and car parking. All the material taken out will have to be disposed of. There is a strict and highly regulated waste policy in place, and rightly so, because it is important for the environment. The bulk of demolition waste has to travel up to 100 km outside the city for disposal. One can imagine the cost of that, as well as travelling through congested traffic. We are negotiating with the Environmental Protection Agency, EPA, and the Department of Communications, Climate Action and Environment to reduce costs in this regard.

We all have to live with taxation. However, the issue of VAT on residential housing is a thorny subject which we have raised with the Department of Finance for quite some time. There is no VAT in Northern Ireland or the UK on housing. However, in the Republic, there is a 13.5% VAT rate on houses, which adds €40,000 to a typical €300,000 starter home in Dublin. Some of my colleagues beside me today negotiated a reduced VAT rate when the industry was in difficulty in the past and it appears to have worked extremely well. A reduction of even €10,000, 4.5% of the rate, would make a house much cheaper for a first-time buyer.

Our biggest concern is the cost of building residential apartment blocks. We are currently building well in excess of 100 acres of office space. This activity signifies 45,000 new construction jobs but we are not building homes for them. We need to accelerate the building of apartment blocks. One can secure viable finance to build an office block, a hotel or student accommodation but not for residential development. The Taoiseach made a commitment at our annual conference this year that he would set up a construction sectorial group, which would embrace several different Departments and be chaired by his Department, to look into problems with costs which are making certain developments unviable. The sooner that sectorial group is established the better.

It is not a tale of woe. The industry is doing well. However, we appreciate there is a void in the turnout of residential housing. It is the viability of those and high costs associated with that which is the problem. We will continue to underline those issues and see if we can make any policy changes in that regard.