Chamberlain Walker

Robust development values: new market reports

The development process is full of risks and complications.

Market risk is a crucial consideration for developers – ensuring development values are sufficient to cover the costs of development (construction costs, planning obligations, etc). All this while providing an acceptable level of profit (c. 20 per cent of Gross Development Value) and return to the landowner (a sufficient premium on Existing Use Value, or EUV).

Successful house builders must have a strong understanding of their local markets (place, product and price). A miscalculation can squeeze profits and/or render development unviable. Due to a gearing effect, a 10 per cent variation in development value has more of an impact on the bottom line than an equivalent variation in development cost.

Planning departments must also have an appreciation of the market context to ensure their plans and policies are viable/deliverable based on sound evidence. This applies to Plan allocations, affordable housing requirements and CIL schedules.

Problems arise when developers and planners disagree on what’s viable. Schemes can become stalled, or worse mothballed. Planning obligations can to some extent be flexed, but this has led to house builders being accused of exploiting a ‘loophole’ to bolster their profits (Shelter report).

In this context, the Government has published draft Planning Practice Guidance for Viability. Whether the proposed Guidance can help to resolve tensions in the system – and deliver better outcomes – is unclear. Whilst there are some issues of concern (such as questions over the proposed EUV+ approach to land value) the new emphasis on transparency (e.g. viability assessments are to be published) and standardisation of inputs is to be welcomed.

The fact is there will always be differences of opinion on the fundamentals of development viability, namely cost and value assumptions. Yet the Guidance signals a change in the dynamics of the system. The Guidance stresses the primary importance of viability assessment at the plan-making stage, so local authorities will need to pay closer attention to their local markets; whilst developers submitting viability assessments, to accompany planning applications, will need to refer back the assumptions the Council made when settings its policies.

A common denominator is that all participants – whether developers, planners or independent advisors – require a robust, defensible evidence base. The new emphasis on transparency raises the stakes for all.

We are apparently awash with information about the housing market, but it takes effort to process the data, fill the gaps, and make sense of it all. Bespoke expert advice can be unduly expensive, whilst standardised reports often don’t hit the mark. That’s why ChamberlainWalker is developing a new approach, which aims to deliver cost-effective, tailored local housing market reports to developers, local planning authorities and viability advisors.

Interactive market reports

The screenshot below shows part of an interactive, web-based report developed by ChamberlainWalker for a recent client in Cornwall.  Similar reports have been developed for others covering different parts of the country, including Corby and Newark and Sherwood.

Key features:

⇒ Developed from practical experience of working with a range of clients at national and local levels

⇒ Automatic collation of data from reliable sources, with data matching to provide metrics such as £/sqft

⇒ A range of descriptive statistics, interactive map and charts

⇒ Ability for users to filter by time period, location, price, floorspace, beds, house type, etc

And for users to define their market / select appropriate ‘comparables’

example_report

Additional features (not shown in the screenshot):

⇒ Regional and national market context

⇒ Data analytics (further enhancing use ability to robustly benchmark development values)

⇒ Platforms: Excel, Power BI, Web

⇒ Other features in development, to meet specific client needs

Why not contact us to find out more: info@cweconomics.co.uk