Construction Costs Offset VAT Cut for Apartments, Says Castlethorn
Housing developer Castlethorn reports that rising construction costs have largely negated the benefits of the government's VAT reduction on new apartments (from 13.5% to 9% until 2030). Despite the VAT cut, construction inflation, including a 7.3% rise in concrete costs, continues to challenge apartment viability. Another developer, Cairn Homes, noted a 39% increase in apartment completions last year.
Housing developer Castlethorn stated that rising construction costs have nearly nullified the benefits of a government measure to boost apartment construction. As part of Budget 2026, the VAT rate on new apartments was reduced from 13.5 per cent to 9 per cent until the end of 2030, aiming to lower building costs.
Castlethorn, active on eight Dublin sites with capacity for 5,700 homes, informed the Oireachtas housing committee that while the VAT reduction was positive, subsequent increases in construction costs have largely offset this benefit. Wholesale prices for construction products rose by 2 per cent in the 12 months to April 2026, with structural steel up 5 per cent and concrete up 7.3 per cent. Expected interest rate increases will further compound these issues.
Cairn Homes, another developer, noted some positive impacts from 2025 government measures, reporting a 39 per cent rise in apartment completions last year compared to 2024. The proportion of new housing commencements that are apartments in the east and midland regions increased from 25 per cent (January 2020–July 2025) to 30 per cent by March 2026.