Financial Viability Assessment - Highfields School London Road Balderton Newark Avant Homes - Planning Alerts | UK
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Financial Viability Assessment Highfields School London Road Balderton Newark Avant Homes 26 February 2021
Contents
Executive Summary 3
1. Introduction 5
2. Site Overview 7
3. Planning Overview 9
4. Residential Market Overview 11
5. Stage One – Residual Land Value 12
6. Stage Two: Benchmark Land Value 24
7. Stage Three: Conclusions 29
8. Conclusions 29
Appendix A – Comparable Revenue Analysis
Appendix B – Proposed Site Layout
Appendix C – Policy-compliant Appraisal Summary
Author
Oliver Salisbury MRICS
Avant Homes I C&W I 2Executive Summary
COVID-19
The outbreak of the Novel Coronavirus (COVID-19), declared by the World Health Organisation as a
“Global Pandemic” on the 11 March 2020, has impacted global financial markets. Market activity is
being impacted in many sectors.
We note that the majority of the comparable evidence which we have considered to inform the
assumptions adopted in this FVA pre-dates the outbreak of COVID-19. The revenues have been
adopted in the FVA on the assumption that market activity will not be disrupted for a prolonged time
period due to the impact of the COVID-19 pandemic.
The scale of the impact of the COVID-19 pandemic on the residential market and sales values cannot
be fully assessed at this stage, as the duration of disruption and the effectiveness of government
support remains unknown. To reinforce, the GDV assessment and adopted sales pace assumptions do
not account for any potential impairment should the market not recover within a reasonable time period.
Given the unknown future impact that COVID-19 might have on the real estate market, we recommend
that you keep under frequent review the assumptions, appraisals and advice contained in this report.
We reserve the right to review our findings once the impact of COVID-19 on the real estate market can
be accurately assessed.
Summary Table
Input C&W Assumption
Site Highfields School, London Road, Newark
Applicant Avant Homes
Consultant Cushman & Wakefield
Proposed Development 99 no. 2, 3, 4 and 5-bedroom dwellings
Policy Requirements 30% affordable housing + S.106 + CIL
Benchmark Land Value £1,750,000 (£225,000 per net acre)
Net Sales Area 121,684 sq ft
Net Developable Area 8.15 acres
GDV £24,512,930
Build Costs £13,380,373
Abnormal Development Costs £3,020,513
Contingency £562,187
Professional Fees £1,096,430
Marketing and Disposal Fees £698,103
Developer’s Profit £4,555,444
Residual Land Value
(Inc. 30% affordable housing, S.106 costs and -£465,000 (negative)
CIL)
Residual Land Value
£735,000 (£90,000 per net developable
(Inc. 10% affordable housing, S.106 costs and
acre)
CIL)
Avant Homes I C&W I 3Conclusions
Our report demonstrates the scheme is unable to viably deliver Newark and Sherwood District Council’s
full planning gain requirements when measured against our opinion of Benchmark Land Value. My client
is however willing to commit to delivery of 10% affordable housing, plus full S.106 and CIL requirements.
Our approach is in accordance with updated planning guidance and is supported by robust
evidence. We consider our conclusions reasonable, justified and valid.
Avant Homes I C&W I 41. Introduction
1.1 Scope
Cushman & Wakefield (C&W) has been instructed by Avant Homes to undertake a Financial Viability
Assessment (FVA) in respect of the proposed residential development of land at Highfields School,
London Road, Newark, Nottinghamshire.
The appraisal is based on an accepted industry methodology, which has been tested by key
stakeholders from both the private and public sectors. It is based on up-to-date information, which will
stand up to public scrutiny.
In preparing this report, C&W can confirm that we have acted with objectivity, impartially, without
interference and with reference to all appropriate available sources of information. C&W can confirm
that that no conflict or risk of conflict of interest exists. We can also confirm that no performance related
or contingent fees have been agreed with respect to the outcome of this report.
The National Planning Policy Framework (NPPF) was revised in July 2018, with further updates
published in May 2019. Paragraph 2 of the PPG on viability and plan-making refers to ensuring viability
and deliverability:
‘Viability assessment should not compromise sustainable development but should be used to ensure
that policies are realistic, and that the total cumulative cost of all relevant policies will not undermine
deliverability of the plan’
1.2 Previous Viability Discussions
The site has been subject to previous planning applications and discussions around viability.
Most recently, detailed applications for the erection of 89 no. and 95 no. dwellings were refused and
subsequently appealed by Avant Homes. The Inspector dismissed the appeal in February 2019 on a
number of grounds, including viability.
As part of the appeal process, AMK Planning Limited prepared an appeal statement in November 2018
on behalf of Newark and Sherwood District Council (NSDC), which considered previous viability
submissions prepared by Devvia Consultancy Ltd and Mussons Liggins (acting on behalf of Avant
Homes). The appeal statement sought to identify areas of common ground in order to narrow the scope
of debate at the Appeal Hearing.
It is worth noting that previous viability discussions were caught in the midst of the 2018 NPPF update,
and parties were requested to update their approaches in light of the new guidance.
We have applied limited weight to previous viability discussions and have undertaken an independent
assessment, recognising three years have lapsed since the appeal hearing and acknowledging that
there is now a greater understanding of how to apply consistency with the July 2018 NPPF update
compared to when it was first introduced. Where relevant, we will make comparisons and comment
where we consider it appropriate and reasonable to do so.
Avant Homes I C&W I 51.3 Cushman & Wakefield’s Methodology
Cushman & Wakefield’s (C&W) methodology for assessing the affordable housing and S.106
contributions that can be viably supported by the proposed scheme is in-line with RICS and planning
policy guidance and has three key stages:
Stage One: Establish appraisal input parameters based on a residual approach, including revenues,
costs and developer’s profit. We will run an appraisal to establish the residual land value assuming
delivery of a policy-compliant scheme including 30% affordable housing and other S.106 requirements.
Stage Two: Identify a Benchmark Land Value in accordance with current NPPF guidance. This
establishes a minimum land value which must reasonably incentivise a landowner to release the site
for development.
Stage Three: Run a scenario-testing exercise to assess the level of affordable housing the proposed
scheme can viably afford to deliver. We will run a sensitivity analysis to demonstrate how viability is
impacted by an adjustment to the level of affordable housing and developer’s profit.
We outline below each of these stages and undertake a robust assessment of the viability of the
proposed scheme.
Avant Homes I C&W I 62. Site Overview
2.1 Site Location
Newark is a market town within the county of Nottinghamshire, lying 19 miles south west of Lincoln, 33
miles north east of Nottingham and 25 miles north of Grantham. Newark’s population was recorded as
27,700 at the 2011 Census.
Newark benefits from excellent connectivity to the A1 and lies 25 miles to the east of Junction 28 of the
M1. London is approximately 125 miles to the south.
Newark North Gate Railway Station lies on the East Coast Main Line and directly serves London Kings
Cross (80 mins), York (45 mins) and Peterborough (21 mins). The town is well-served by public
transport links, connecting with surrounding villages and towns. Newark town centre includes a good
selection of local, regional and national retailers.
There is a good supply of local schools within close proximity of the subject site, including Newark
Orchard School (rated as Good by Ofsted), Magnus Church of England Academy (rated as Good) and
Highfields School, an independent school and nursery.
The subject site lies to the north of London Road within the suburb of Baldertib, 1 mile to the south east
of the town centre and surrounded by residential uses.
2.2 Site Description
The site is predominantly greenfield in nature, comprising open fields, sports pitches, woodland and
hedgerows, and enjoys a broadly level topography.
The northern portion of the site is broadly rectangular in shape whilst the southern area is arranged in
an L-shape with a frontage to London Road and arranged around Highfields School and its associated
playing fields.
The site is surrounded by residential uses. To the north are two-storey detached dwellings and
bungalows fronting Barnaby Road. There are allotments abutting the western boundary, beyond which
is pond. To the south are large detached dwellings fronting The Woodwards and Glebe Park.
We are informed the site extends to a gross area of 12.32 acres and a net developable area of 8.15
acres, representing a 34% gross to net reduction.
2.3 Proposal Summary
Avant Homes proposes to develop the site into a scheme of 99 no. 2, 3, 4 and 5--bedroom semi-
detached and detached dwellings.
The proposed scheme is served by an access road leading from London Road circulating the southern
and eastern boundaries of Highfields School.
The northern portion of the site accommodates housing arranged in a linear configuration around a
central spine road and a cul-de-sac to the north western corner. There is also an additional area of land
to the west of rectangular shape, comprising public open space.
The proposed site plan is provided within Appendix B. The proposed schedule of accommodation is
as follows:
Avant Homes I C&W I 7House type Type Beds No. NSA (sq ft) Total NSA
Helmsdale Semi-detached 2 5 745 3,725
Berryfield Semi-detached 2 6 754 4,524
Farnston Detached 3 7 881 6,167
Nithsdale Semi-detached 3 5 903 4,515
Hivestone Detached 3 4 953 3,812
Hornstone Detached 3 4 982 3,928
Irkston Detached 3 5 1,010 5,050
Ivyston Detached 3 6 1,026 6,156
Lakebrook Detached 4 4 1,074 4,296
Mulbrook Detached 4 5 1,221 6,105
Nutbrook Detached 4 3 1,314 3,942
Palmbrook Detached 4 6 1,355 8,130
Skybrook Detached 4 8 1,480 11,840
Swanbrook Detached 4 6 1,502 9,012
Tambrook Detached 4 7 1,503 10,521
Tidebrook Detached 4 4 1,565 6,260
Teebrook Detached 4 5 1,645 8,225
Varnwick Detached 5 5 1,660 8,300
Wellingwick Detached 5 4 1,794 7,176
Totals 99 121,684
Averages 1,229
The proposed mix includes 11% 2-beds, 32% 3-beds, 48% 4-beds and 9% 5-beds. The proposed Net
Sales Area (NSA) is 121,684 sq ft and dwellings range from 745 sq ft to 1,794 sq ft, reflecting an average
of 1,229 sq ft.
We note 31 no. dwellings (31%) are smaller than 1,000 sq ft and 68 no. dwellings (69%) are larger than
1,000 sq ft. The majority of proposed units are detached, accounting for 83 no. units (84%) with 16 no.
semi-detached units (16%). The average detached unit size is 1,312 sq ft and semi-detached size is
798 sq ft. All proposed dwellings extend to 2-storeys.
From our experience of selling and valuing residential development land and undertaking viability
assessments across the region, new-build schemes currently range in development density between
14,000 sq ft and 16,000 sq ft per net developable acre, depending on product mix and market area.
The proposed scheme reflects a density of 14,930 sq ft or 12 units per net developable acre, which is
considered a reasonable density for a scheme of this nature and within this location.
Avant Homes I C&W I 83. Planning Overview
3.1 Planning Policy
Relevant planning policies are contained within the Newark and Sherwood District Council’s Amended
Core Strategy (adopted March 2019) and the Allocations and Development Management Development
Plan Document (adopted July 2013).
The site falls within the Sub-Regional Centre and the Newark Urban Area, which is focussed on housing
and employment growth. It sets out a target of 9,080 dwellings between 2013 and 2033, with 60% of
growth planned within the Newark Urban Area.
NSDC is in the process of updating its Local Plan, with emerging revisions in respect of the Allocations
and Development Management Development Plan and a new allocations strategy.
3.2 Planning History
The site has been subject to a number of recent planning applications for residential use:
• A detailed application for a 95-no. unit scheme was refused in September 2017 (Ref:
17/00357/FULM) on account of viability issues, loss of trees and inadequate ecological
protection, which NSDC determined was contrary to the aims of sustainable development.
• A subsequent appeal was dismissed in February 2019 (Ref: APP/B3030/W/17/3188864) on
account of viability, ecology, crime and disorder, character and appearance issues and loss of
protected trees.
• A detailed application for 89 no. dwellings was refused in September 2015 (Ref:
16/01134/FULM) due to issues arising from a planning multi-use games area and the
associated planning impact and anti-social issues.
• An appeal was dismissed in February 2019 (Ref: APP/B3030/W/3188871) on account of
viability issues, but the Inspector did accept the scheme was acceptable in terms of ecology,
crime and disorder, character and appearance and removal of protected trees.
• A detailed planning application was refused in July 2015 in respect of a 91-no. unit scheme,
which was subject to an appeal in March 2016 (Ref: 14/01964/FULM). The case for viability
was agreed under a Statement of Common Ground, and the Inspector concluded the proposed
development would make adequate provision towards infrastructure and affordable housing,
even with the reduced planning obligation package offered on account of viability.
3.3 Affordable Housing
NSDC’s adopted policy seeks 30% affordable housing delivery on sites of 10 or more dwellings across
a tenure mix of 60% social-rented and 40% intermediate product.
Based on the proposed development of 99 no. dwellings, NSDC policy confirms that 30 no. units should
be of affordable tenure.
Planning policy states there is a preference for on-site provision, but recognises off-site provisions or
contributions may be appropriate, subject to viability in accordance with Core Policy 1.
Avant Homes I C&W I 93.4 S.106 Requirements and CIL
We are informed NSDC seeks the following off-site S.106 contributions:
• Provision for children and young people at a rate of £927.26 per dwelling, amounting to £91,799
• Bus stop contribution to London Road at a fixed cost of £20,000
• Healthcare contribution toward local care provision at a rate of £982.62 per dwelling, amounting
to £97,279
• Library contribution of £47.54 per dwelling, amounting to £4,706
• Community facilities contribution toward local facilities at a rate of £1,384.07 per dwelling,
amounting to £137,023
• Education contribution in respect of 20 primary school places, reflecting a total contribution of
£348,250
• Total S.106 contributions - £699,057
In addition, NSDC has an adopted CIL policy, which seeks a payment of £45 per sq m across the Gross
Internal Area of new residential dwellings, subject to indexation. We have applied a CIL rate of
£472,923, which assumes 70% private housing and indexation in line with the BCIS all-in Tender Price
Index.
Based on the proposed development of 99 no. dwellings, NSDC therefore seeks delivery of 30%
affordable housing (30 no. dwellings) plus £699,057 towards off-site S.106 payments and
£472,923 towards CIL.
Avant Homes I C&W I 104. Residential Market Overview
4.1 UK Housing Market
The December 2020 RICS UK Residential Survey indicates rising market activity, though recognising
the rate of growth has reduced significantly since earlier in H2.
Sales expectations have retreated, with respondents anticipating the latest lockdown restrictions,
alongside the expiry of the SDLT holiday, will impact activity going forward. +15% of participants saw
an increase in enquiries during December, though this is down from +26% from the previous survey.
New instructions have increased, though modestly, which runs alongside the number of appraisals
being undertaken, which remain higher than in the comparable period of 2019. December represented
the seventh consecutive month where agreed sales are increasing, although it is noted growth has
softened during the summer and autumn months.
Short-term sales expectations have reduced to a net balance of -22% from the headline level, which is
reflective of the lockdown pressures and is the weakest reading since April 2020.
The twelve-month horizon indicates sales expectations are only marginally negative, at -6%.
House prices continue to sharpen, whilst London is the only region where house price inflation is muted.
Forecasts anticipate momentum behind house prices fading significantly over the near term. +24% of
respondents anticipated national house prices will be higher in 12 months’ time.
Avant Homes I C&W I 115. Stage One – Residual Land Value
To establish the viability of the proposed scheme we have adopted the residual approach, which
involves calculating the Gross Development Value (GDV) of the development on completion and
deducting all costs associated with bringing the scheme forward, including an element of developer’s
profit.
5.1 Gross Development Value
In accordance with planning policy guidance, to establish achievable revenues for the proposed scheme
we have assumed delivery by a hypothetical housebuilder. We have undertaken research on new-build
and second-hand sold prices in the locality, taking care to select developments and properties which
are most closely comparable to the subject site.
5.1.1 New-build Revenue Analysis
The most relevant evidence for establishing likely sales revenues on new-build schemes is other
comparable new build developments. Evidence should come from schemes within the immediate
vicinity of any site being considered or, if this is not possible, schemes situated within neighbouring
areas where house prices are comparable.
The key benefits of utilising new build evidence are:
• Accurate floor areas can be verified through information included on house builder websites or
from floor plans submitted as part of the planning application for a site
• New build housing is more homogenous than second-hand stock, with specification typically
similar across schemes and prior to alterations and additions by individual homeowners
• Values can be therefore accurately be compared on a rate per sq ft basis
When utilising new-build evidence, it is important to note that housebuilders frequently offer incentives
to purchasers or negotiate discounts against quoted asking prices to achieve sales.
Not all sales incentives offered by developers to secure plot sales are accounted for within the figure
quoted at HM Land Registry (HMLR), most notably, part-exchange. For the purpose of comparing net
sales revenues on a like-for-like basis, the price quoted on HMLR should therefore be discounted to
allow for additional sales incentives, typically in the order of 3-5% depending on market area. For the
purposes of this report we have applied a discount of 3% from the gross revenues sourced from HMLR.
Note that in analysing sales evidence we have relied upon HMLR data and floor areas contained within
the EPC Register. As such, we are reliant upon the accuracy of this data. While there may be some
margin of error, the comparables do nonetheless provide good evidence for likely achievable values at
the subject site and are in-line with our expectations of value based upon our market knowledge.
We have utilised the following new build evidence to inform our assessment of achievable revenues.
There is a limited supply of new-build housing within Newark; the most comparable and recent is the
Middlebeck development to the southern fringe, which is being developed jointly by Avant Homes and
Bellway Homes. We have therefore undertaken analysis of these schemes, alongside analysis of the
local second-hand market to inform our view of achievable revenues.
Avant Homes I C&W I 12A full breakdown of comparable evidence is provided within Appendix A. We have sought to focus our
analysis on semi-detached and detached units, which are consistent with those proposed.
5.1.2 Bellway Homes – The Foresters
The Foresters is a scheme of 64 no. 2, 3 and 4-bedroom dwellings across terraced, semi-detached and
detached house types. The site is situated to the southern fringe of Newark town centre, 2 miles to the
south west of the subject site.
Bellway Homes secured reserved matters approval in November 2017 under reference
17/01672/RMAM. The land forms part of a housing allocation and sits to the north of Avant Homes’
development.
The scheme comprises 100% market housing across a mix of 2/2.5-storey dwellings, including 3 no. 2-
beds (5%), 14 no. 3-beds (22%) and 47 no. 4-beds (73%). The development comprises 46 no. 2-storey
units (72%) and 18 no. 2.5-storey units (28%).
The site forms part of a wider application, which seeks delivery of up to 3,000 new homes. The outline
consent across the wider scheme stipulated a S.106 requirement of 7.5% affordable housing across
the first 1,000 homes, but all units across The Foresters have been delivered as private housing.
Our market research confirms there were 53 no. open market transactions between January 2019 and
August 2020, representing a rate of 2.8 private sales per month.
Averages
House Type No.
Size Price Gross £ per sq ft Net £ per sq ft
Semi-detached 25 975 £211,040 £216 £210
Detached 25 1,159 £269,940 £233 £226
Blended 50 1,067 £240,340 £225 £218
The average blended sale price was £240,340 across 1,067 sq ft, representing an average gross
revenue of £225 per sq ft over a range of £195 to £259 per sq ft.
Whilst HMLR does account for most sales incentives offered by the housebuilder to the purchaser, it
does not account for all incentives, most notably part-exchange, where the net receipt to the
housebuilder may follow sometime after submission of forms to HMLR.
On this basis, we have assumed a 3% discount to the average griss revenues on a £ per sq ft basis to
establish a net revenue position. We therefore surmise the blended average net revenue equates to
£218 per sq ft.
Our analysis indicates there is a quantum adjustment whereby the smaller units have achieved a higher
revenue on a £ per sq ft basis by comparison to the larger units, which falls in line with our expectations.
Furthermore, the semi-detached average net revenue of £210 per sq ft falls below the average detached
revenue of £226 per sq ft, which accounts for the mix of 2.5-storey semi-detached units, which typically
command a lower revenue on a £ per sq ft compared to traditional 2-storey units on account of reduced
footprint and restricted eaves heights to the upper floor. The blended average gross revenue across
Avant Homes I C&W I 13these 2.5-storey semi-detached units is £203 per sq ft (£197 per sq ft net). Therefore, the average net
revenue for all semi-detached properties of £210 per sq ft is reduced as a result.
Given the proposed scheme comprises larger detached house types, we have applied more weight to
this evidence.
In terms of detached units, the prices ranged from £220,000 to £340,000 across units of 872 to 1,464
sq ft. The evidence includes 2 no. detached properties of 872 sq ft, which attracted a premium of £252
per sq ft gross, which lies above the revenues for the larger house types. Disregarding these two
properties, the average detached gross revenue is £231 per sq ft, discounting to £224 per sq ft on a net
basis.
The scheme lies within a broadly comparable location, 2 miles from the A1 and with good access to
local amenities and schools. We therefore consider it provides a reliable indication of where new-build
revenues for larger house types may lie.
5.1.3 Avant Homes – The Heddles
The Heddles by Avant Homes is a scheme of 173 no. 3, 4 and 5-bedroom homes lying immediately to
the south of The Foresters, 2 miles to the south west of the subject. Avant Homes secured reserved
matters approval in March 2017 under planning reference 16/02120/RMAM.
We have been provided with net sales evidence by Avant Homes, which confirms there were 22 no.
transactions of two-storey dwellings between February 2020 and February 2021, reflecting a sales rate
of 1.7 units per month.
Averages
House Type No.
Size Price Gross £ per sq ft
Semi-detached 1 998 £201,328 £202
Detached 21 1,568 £344,532 £220
Average 22 1,543 £338,023 £219
The detached units ranged from 1,217 to 1,949 sq ft and achieved prices between £269,450 and
£432,995, representing between £191 and £231 per sq ft.
The evidence indicates the larger detached units achieved a lower revenue on a £ per sq ft basis on
account of quantum, which falls in line with expectations.
For example, there were 10 no. transactions of detached properties between 1,217 sq ft and 1,628 sq
ft, which achieved an average sale price of £296,631, representing £223 per sq ft. There were 11 no.
sales of units between 1,628 sq ft and 1,949 sq ft, which achieved an average sale price of £397,329,
reflecting £216 per sq ft net.
The scheme represents robust comparable evidence in terms of location and product, though we note
no units being delivered at The Heddles are proposed at the subject.
We also note the average detached net revenue of £220 per sq ft across 1,568 sq ft is comparable to
the net revenue assumption of £226 per sq ft being achieved by Bellway, though recognising the
Bellway average detached unit size is 1,159 sq ft, which justifies the higher revenue.
Avant Homes I C&W I 14Nevertheless, we have applied significant weight to this evidence and anticipate comparable revenues
will be achievable for similar house types, though recognising a higher blended revenue can be
expected given the proposed average unit size is smaller by comparison.
5.1.4 Second-hand revenue analysis
The scheme sits close to established residential areas and we have undertaken analysis of the
immediate second-hand market to inform our approach. Whilst not as important as new build evidence,
second-hand data can help establish likely end-revenues on new build schemes, providing an indication
of the strength of a market area. There are however weaknesses that must be taken into consideration:
• Accurate information on size is not always available. For example, some estate agents only
provide areas for rooms, excluding hallways, bathrooms and en-suites, while others include all
useable space, including bathrooms, halls and conservatories. EPCs include bathrooms, en-
suites and hallways but exclude conservatories. Differences in the way that areas are
calculated can make direct comparison difficult.
• There is typically no way to verify the accuracy of the floor area information available.
• Second-hand stock is not homogenous, with condition, specification and decor varying from
property to property. Such differences can have a significant impact on the price achievable
and make it difficult to analyse values accurately.
We have utilised floor area information from the EPC Register and whilst we appreciate these may not
provide a completely accurate assessment by comparison to new build, the figures can be used as a
good indicator of revenues achieved in the surrounding area.
The most comparable properties in terms of location lie to the east along The Woodlands and Glebe
Park. These are executive, detached units across 5 or 6 bedrooms and occupying large plots with
generous-sized rear gardens. Our analysis indicates there have been five transactions since January
2018.
Date Address Type NSA Sale Price £ per sq ft
Apr 2020 16 Glebe Park Detached 2,411 £475,000 £197
Jul 2019 Cliveden, 11a Detached 3,552 £732,500 £206
Dec 2018 35 Glebe Park Detached 2,820 £600,000 £213
Nov 2018 18 Glebe Park Detached 2,336 £485,000 £208
Oct 2018 4 The Woodwards Detached 3,775 £582,000 £154
Average 2,913 £570,750 £196
The evidence illustrates the size of the surrounding properties and the high capital values achieved,
ranging from £475,000 to £732,500 across an average of 2,913 sq ft, reflecting a blended average
revenue of £196 per sq ft.
The properties are significantly larger than those proposed, but provide an indication of capital values
within the area, though we note the £ per sq ft is lower on account of quantum, with only £154 per sq ft
being achieved for the largest unit.
Whilst we consider the proposed development will target a cross-section of the market, it is important
to be mindful of the established second-hand market when forming an opinion of anticipated new-build
Avant Homes I C&W I 15revenues. It is generally accepted by property professionals working within the residential industry that
a new-build premium typically lies between 5% and 15%.
On this basis, it is reasonable to assume a new-build premium in the order of £206 to £225 per sq ft.
However, given the size of these properties and associated capital values, we recognise the revenue
on a £ per sq ft basis is reduced. We therefore anticipate a new-build premium will lie to the upper end
of this range, which is consistent with the new-build evidence analysed.
It should be noted that no detailed analysis has been undertaken in respect of the time spent marketing
individual properties to achieve the sales revenues outlined.
Avant Homes I C&W I 165.1.5 Summary of new-build revenues
Our analysis of new-build revenues is as follows:
Overall
Scheme House Type Comparison
Floor Area Price Gross £ per sq ft Net £ per sq ft
Semi-detached 975 £211,040 £216 £210
The Foresters* Detached 1,159 £269,940 £233 £226 Similar
Blend 1,067 £240,340 £225 £218
Semi-detached 998 £201,328 - £202
The Heddles Detached 1,568 £344,532 - £220 Similar
Blend 1,543 £338,023 - £219
*a 3% discount has been applied to the gross average revenue to account for sales incentives not captured by HMLR
Avant Homes I C&W I 175.1.6 GDV Summary – Market Housing
Newark is a popular and desirable market town, benefitting from good access to the A1, surrounding
rural areas and Lincoln, Nottingham and Sheffield. The railway connections to major cities and London
also boost its marketability and appeal as a family and commuter destination, further bolstered by its
good supply of schools and local amenities.
The subject site lies within an attractive suburb of Newark, with good access to the town centre and
main road network. It lies close to surrounding residential areas and adjacent to executive detached
areas to the south east along The Woodlands and Glebe Road, where capital values average £570,000.
We have analysed the two new-build schemes being delivered by Avant Homes and Bellway Homes,
which form part of the Middlebeck development and the wider housing allocation of 3,000 new homes.
These schemes represent the most recent and comparable new-build evidence and benefit from semi-
rural aspect but comparable connectivity to the A1, A46 and town centre.
The majority of evidence derives from detached unit types and there is clear consistency between the
two schemes. Comparing these average blended net revenues, Avant Homes has confirmed an
average of £220 per sq ft is being achieved across 1,568 sq ft, which compares to the higher revenue
of £226 per sq ft being achieved by Bellway across 1,159 sq ft, representing an adjustment for quantum.
We have also analysed the second-hand market within immediate proximity, though we note properties
fronting The Woodlands and Glebe Road are significantly larger. The average revenue achieved across
five recent sales is £196 per sq ft over an average of 2,913 sq ft. Assuming a new-build premium of
15% would indicate revenues of £225 per sq ft are achievable. Again, this is broadly consistent with
revenues being achieved at The Foresters and The Heddles.
5.1.7 GDV Summary – Affordable Housing
Our assessment of achievable transfer values, assuming transfer to a Registered Provider, assumes
delivery of 30% affordable housing in accordance with NSDC policy.
In the absence of prescribed transfer values, we have assumed a 50% discount to the average blended
private revenue, which we consider represents a reasonable approach and assumes a blend of 60%
social rented and 40% intermediate affordable product.
5.1.8 GDV Conclusions
Having regard to our comparable evidence analysis, our assessment of achievable revenues is as
follows assuming delivery of 30% affordable housing:
Avant Homes I C&W I 18Private (70%)
House type Type No. NSA £ psf Sale price Total Sales
Hornstone Detached 1 982 £235 £230,770 £230,770
Irkston Detached 5 1,010 £233 £235,330 £1,176,650
Ivyston Detached 6 1,026 £233 £239,060 £1,434,360
Lakebrook Detached 4 1,074 £232 £249,170 £996,680
Mulbrook Detached 5 1,221 £229 £279,610 £1,398,050
Nutbrook Detached 3 1,314 £227 £298,280 £894,840
Palmbrook Detached 6 1,355 £226 £306,230 £1,837,380
Skybrook Detached 8 1,480 £224 £331,520 £2,652,160
Swanbrook Detached 6 1,502 £223 £334,950 £2,009,700
Tambrook Detached 7 1,503 £223 £335,170 £2,346,190
Tidebrook Detached 4 1,565 £222 £347,430 £1,389,720
Teebrook Detached 5 1,645 £219 £360,260 £1,801,300
Varnwick Detached 5 1,660 £224 £371,840 £1,859,200
Wellingwick Detached 4 1,794 £222 £398,270 £1,593,080
Totals 69 95,995 £21,620,080
Averages 1,391 £225.22 £313,334
Affordable (30%)
House type Type No. NSA £ psf Transfer Value Total Sales
Helmsdale Semi-detached 5 745 £112.61 £83,890 £419,450
Berryfield Semi-detached 6 754 £112.61 £84,910 £509,460
Farnston Detached 7 881 £112.61 £99,210 £694,470
Nithsdale Semi-detached 5 903 £112.61 £101,690 £508,450
Hivestone Detached 4 953 £112.61 £107,320 £429,280
Hornstone Detached 3 982 £112.61 £110,580 £331,740
Totals 30 8,240 £2,892,850
Averages 824 £112.61 £96,428
Total (100%)
Totals 99 121,684 £24,512,930
Averages 1,229 £201.45 £247,605
Whilst the properties may ultimately be marketed for a value higher than the figures stated, our opinion
of revenues represents the value we consider a housebuilder could achieve following deductions for
negotiating discounts and incentives. Asking prices could be in the region of 5% higher to allow for
these incentives and price negotiations.
5.2 Cost Assumptions
5.2.1 Build costs
To assess the residual land value of the proposed development, we have deducted the costs of
construction from the GDV. The cost assumptions associated with identifying the value of the proposed
scheme fall into two distinct sections:
• The cost of delivering the housing, including plot externals; and
• The cost of delivering the infrastructure, services, site works etc. over and above that of the
traditional house building costs. These are the abnormal development costs.
Avant Homes I C&W I 19The NPPF and PPG guidance states build costs should be based on appropriate data and identifies the
Build Cost Information Service (BCIS) as an appropriate source. A scheme of this scale will appeal to
volume housebuilders and therefore the lower quartile build cost estimate is a reasonable point of
reference.
The BCIS lower quartile rate for general estate housing dated 13 February 2021 and rebased to Newark
over a 5-year period equates to £1,076 per sq m (£99.96 per sq ft), which includes standard plot build
plus prelims.
Whilst BCIS average price data include preliminaries, it does not account for costs associated with
immediate plot externals such as gardens, driveways and utility service connections. We have therefore
included a 10% allowance to account for plot externals not captured within the BCIS data. This gives
an ‘all-in’ build cost of £1,183.60 per sq m (£109.96 per sq ft).
For the avoidance of doubt, this cost relates to the plot build and plot externals only and makes no
allowance towards abnormal development cost items. Our approach is robust, consistent with the latest
NPPF guidance and is supported by independent BCIS data.
5.2.2 External Garages
We have also factored in an additional cost for external garages, which are not accounted for in the
above data. We are advised the proposed scheme includes 19 no. single and 9 no. double garages,
and we have apportioned costs of £10,000 per single and £15,000 per double garage.
Our appraisal therefore includes a cost of £325,000 for external garages.
5.2.3 Abnormal Development Costs
Our appraisal adopts an abnormal development cost of £3,020,513, equating to approximately
£370,000 per net developable acre and £30,500 per plot. The breakdown of abnormal development
cost items assumed is as follows:
Item Cost
Ground Conditions and Foundations
De-watering to all excavations to address water ingress at depths beyond
£280,000
1.5m
E/o foundation costs to allow up to total 1.8m depths from FFL £250,234
De-watering plot foundations at rate of £450 per unit £44,550
Increase to sewer & mh rates for difficult working £62,220
Removal of contamination present in minor hotspots on site £10,000
Earthworks including Cut & Fill
Cut & fill works in accordance with Dice consulting detailed design (Drawing
ref 100406_01_000_01). Site strip to northern parcel including retention of £368,369
450mm on site top soil (circa 1,800m³ fill) & cart away of surplus topsoil
74m total retaining structures to max height of 600mm £13,394
Capping Layer to Road
300mm capping layer to achieve 3% CBR £70,950
Foul & Surface Water Drainage
Oversized pipes ranging from 525 to 750 dia. including celluar crate storage
of 1958m³. Works in accordance with Dice Consulting Adoptable Drainage £783,993
(Drawing Ref 100406_01_0500)
Avant Homes I C&W I 20Item Cost
Drainage outfall fees including cost of procurring third party land to western
£100,000
boundary controlled by Railway Paths Ltd
Installation of new foul water pumping station £174,000
Highways and Section 278 Works
E/o costs for additional 275m road to facilitate access from London Road £380,895
S278 works required to London Road including formalised right turn lane £50,000
E/o costs associated with small plant use to new site entrance £68,000
Utilities & Services
Provision of new onsite electrical substation £30,000
Service diversion costs to entrance spine road crossing existing 63PE gas
£100,000
main, 120CNE LV main & virgin Media infrastructure
Trees, POS & Landscaping
Tree removals in accordance with BWB Arboricultural Impact Assessment,
£58,000
including protection fencing during construction
POS works including landscaping in accordance with site layout £29,329
Offsite public footpath to Barnby Road - 2m wide tarmac with PCC edgings £12,400
Ecological mitigation to include creating of 2m wide ecological corridor to
£53,095
northern & southern site boundaries. Provision of bat & bird boxes
School Works
Fencing and electric gates to eastern school boundary abutting main spine
£20,000
road
Works within existing school drainage system £10,000
Sustainability
EV charging points at £516 per unit £51,084
Total £3,020,513
We have phased payment of abnormal costs on a weighted approach from the start of the pre-
construction period until the end of the construction period to reflect the assumption the majority of
abnormal costs will be incurred in the early stages of development.
5.2.4 Professional Fees
Professional fees typically range from 6-10% of the standard build cost depending on site complexity
and design challenges.
Given the scale of proposed development, we have applied Professional Fees of 8% to the standard
build and garage costs. We also recognise the site has been subject to a number of applications and
appeals and as such has been subject to significant expenditure to date.
5.2.5 Contingency
In our experience, contingency allowance should range from 3-5%, depending on the risks associated
with the development.
We have adopted a 3% contingency to the standard build cost including garages. We have applied a
5% contingency to the abnormal development costs to reflect the greater uncertainty and risk.
Avant Homes I C&W I 215.2.6 Finance
We have adopted a finance rate of 6% based on the land and construction cost assuming 100% debt
finance, inclusive of all arrangement, monitoring and exit fees.
5.2.7 Marketing and Sales Fees
We have allowed 2% marketing and 1% agent fees to the private units, plus £500 per unit legal fees
across all tenures.
5.2.8 Acquisition Costs
We have assumed standard acquisition costs, comprising Stamp Duty Land Tax at the prevailing rate,
1% agent and 0.5% legal fees.
5.2.9 S.106 Contributions
We have allowed S.106 payments in accordance with the breakdown provided within Section 3.3, as
follows:
• Provision for children and young people - £927.26 per unit, amounting to £91,799
• Bus Stop Contribution - £20,000
• Healthcare Contribution - £982.62 per unit, amounting to £97,279
• Library Contribution - £47.54 per unit, amounting to £4,706
• Community Facilities Contribution - £1,384.07 per unit, amounting to £137,023
• Education Contribution - £348,250
• CIL - £45 per sq m subject to indexation, equating to £472,923.
In the absence of further information, we have assumed S.106 payments commence upon first
occupation and are paid on a monthly basis for the duration of the sales period.
We have assumed a CIL payment of £472,923 is paid upon commencement of construction on a bi-
annual basis.
5.2.10 Sales and Build Rate
We have had regard to the existing supply of new-build housing schemes and have assumed a build
and sales rate of 2.5 no. private units per month. The build and sales period each equate to 28
months, or 2.3 years. This reflects a build and sales rate of 3.5 units per month across all tenures.
We have assumed the development includes a 3-month lead-in with sales commencing 5 months after
construction start. We have assumed a 5-month post construction tail for the sale of the final units. Our
cashflow assumes a total development timeline of 37 months, or 3.1 years.
5.2.11 Developer’s Profit
There continues to be a healthy debate across the industry around what represents an appropriate level
of developers profit in viability assessments. There is no definitive answer, although the majority of
guidance and appeal precedents point to a minimum profit of 20% of GDV being appropriate.
Published in July 2018, updated PPG and NPPF guidance on viability identifies an assumption of 15-
20% of GDV may be considered a suitable return for developers to establish the viability of planning
Avant Homes I C&W I 22policies. It acknowledges that alternative figures may be suitable where there is evidence to support,
depending on the type, scale and risk profile of planned development.
However, this assumption relates to planning stage viability when specific cost information is unlikely to
be available.
C&W have experience in selling a range of residential development land to national and regional
housebuilders and we can confirm that from our experience they do not vary their profit requirement
below 20% of GDV. C&W also undertake a significant number of bank funding valuations for
developments to be undertaken by housebuilders and can confirm that a development which generates
a profit on GDV of less than 20% is highly unlikely to be able to secure development funding. In the
absence of bank funding, some housebuilders have sought funding through alternative sources, notably
high net worth individuals and property investment companies. In our experience, such individuals are
also unwilling to support developments which generate a profit of less than 20% of GDV.
Furthermore, a higher profit level is reflective of the high upfront infrastructure costs, and ongoing
economic and market uncertainty resulting from the COVID-19 pandemic. These factor undoubtably
increase the risk profile and we therefore consider a profit target of 20% is a realistic expectation.
The updated NPPF guidance indicates that a lower level of profit may be accepted by the developer in
respect of affordable units, as they are transferred to a Registered Provider. We consider 8% of GDV
to be reasonable on affordable units.
We have therefore adopted a blended developer’s profit, based on 20% on the private GDV and 8%
on the affordable GDV, which is consistent with NPPF guidance. The blended profit equates to 18.58%
on GDV.
5.3 Residual Land Value
We have established appropriate appraisal input parameters to inform a residual appraisal calculation
using Argus Developer software.
We have prepared a policy-compliant appraisal based on the proposed scheme and mix, which
assumes delivery of 30 no. affordable units (30%), S.106 contributions of £699,057 and a CIL payment
of £472,923.
We have adopted market-facing inputs based on our market research and experience, and abnormal
development costs provided by our client. Our inputs are supported by evidence and are considered
robust and appropriate.
The residual output based on a policy-compliant position equates to a negative land value of
-£465,000.
Avant Homes I C&W I 236. Stage Two: Benchmark Land Value
6.1 Overview
To assess the viability of the proposed development, we must compare the residual land value
established in Stage One with a Benchmark Land Value (BLV).
On 24 July 2018, the Government published updated National Planning Policy Framework (NPPF) and
Planning Policy Guidance (PPG) in respect of viability. This introduced a new approach for assessing
BLV known as Current Use Value Plus (CUV+). The guidance was subsequently amended in May
2019, which provided more clarity around the approach to establishing BLV.
The RICS released its own revised guidance in May 2019 by way of publication of Financial Viability in
Planning: Conduct and Reporting, 1st Edition, which become mandatory for RICS members undertaking
viability assessments in September 2019.
To determine CUV+, guidance states we are first required to establish the CUV of the land. We must
then establish the landowner premium, which is the minimum amount over and above CUV which
reasonably incentivises a sale and releases the site for development. The guidance states BLV should:
• be based on CUV;
• allow for a sufficient premium to landowner(s);
• reflect the implication of abnormal costs, including infrastructure costs and professional fees;
and
• be informed by market evidence, including current uses, costs and values, where possible.
Market evidence should be based on policy-compliant developments or otherwise be adjusted
to reflect the cost of according with planning policy.
The guidance states that the price paid for the land cannot be used to support BLV and reduce the level
of planning gain delivery.
PPG also recognises it may be appropriate to establish a viable Alternative Use Value (AUV). In such
instances, AUV should by evidenced by cost and value information to support the BLV. However, as
the premium is implicit within the AUV, it must not be double counted.
6.2 Previous Viability Discussions
Throughout initial viability discussions and upon commencement of the appeal hearing in September
2018, BLV was agreed between NSDC and Avant Homes at £1,329,566. This was calculated adopting
the Shinfield appeal decision precedent, with BLV reflecting a 50% uplift between existing use value
and the residual land value assuming residential use.
However, in light for the July 2018 NPPF update, upon commencement of the appeal, the Inspector
adjourned the hearing to allow both sides to reconsider their approaches to viability, most notably on
account of the recent introduction of the EUV+ approach to establishing BLV.
Subsequent to the adjournment, an existing use value of £200,000 and a BLV of £300,000, based on a
50% premium uplift, was proposed by Devvia Property Consultancy Ltd and Mussins Liggins, acting on
behalf of Avant Homes. This was subsequently agreed by AMK Planning Ltd as part of the appeal
statement prepared on behalf of NSDC in February 2019.
Avant Homes I C&W I 24To provide context, a BLV of £300,000 reflects only £37,000 per net developable acre based on the net
area of 8.15 acres, equating to a multiplier of around 1.6 times above the CUV of £23,000 per net
developable acre.
In the context of planning precedents and transactional evidence, it is our independent view that this
this level of uplift falls significantly below the land value that would be sufficient to reasonable incentivise
the landowner to release the land for residential development.
We would comment that the previous viability assessment undertaken on our client’s behalf was
prepared at a point in time when viability guidance had only recently been updated. The guidance
introduced fundamental changes, particularly in respect of the EUV+ approach. Through our own
experience, we recognise that at that time, practitioners were seeking to grasp the EUV+ concept and
apply it in a manner that was fully consistent with the guidance.
In the fullness of time, we disagree with the methodology and approach to establishing BLV and we
therefore argue that the BLV assessment at £300,000 now carries very limited weight. We have
therefore disregarded this approach within our assessment.
6.3 Current Use Value
Establishing CUV is the first component in assessing Benchmark Land Value. In the PPG, Current Use
Value is defined as:
‘the value of the land in its existing use. Current use value is not the price paid and should disregard
hope value.’
The site is greenfield in nature, comprising sports pitches, open fields, hedgerows and trees and
therefore we consider it appropriate to consider the value of the land on the basis of amenity and
agricultural greenfield land values.
Amenity land values vary but typically command in the order of £7,500 - £12,500 per gross acre,
dependant on quality, location, size, etc. Amenity or agricultural land rarely transacts on the open
market and therefore sourcing land evidence is challenging, however, there are a number of sources
we can consider in support of our assessment.
The most recent RICS/RAU Rural Land Market Survey dated H2 2018 confirms the weighted average
price based on transactions of farmland nationally is £10,519 per acre.
In addition, we are aware of a parcel of arable and pasture land at Melbourne, Derbyshire, which
extends to 11.64 acres and is currently for sale at an asking price of £120,000, equating to £10,300 per
acre. Furthermore, grazing land extending to 9.06 acres at Walton, Chesterfield, sold in November 2018
at a rate of £13,024 per acre.
The site is located within an urban area and we consider a higher rate by comparison to rural agricultural
values to be appropriate.
We have therefore assessed the CUV at a rate of £15,000 per acre, equating to £185,000 based
on the gross area of 12.32 acres. For reference, this reflects approximately £23,000 per net
developable acre.
Avant Homes I C&W I 256.4 Landowner Premium (+)
To assess the level of planning gain delivery the scheme can afford, viability guidance states we must
assess a reasonable landowner premium over and above CUV which we consider would suitably
incentivise the landowner to release the site for residential development having regard to the risks and
anticipated returns.
Guidance states that the landowner premium should:
• provide a reasonable incentive for a landowner to bring forward land for development while
allowing a sufficient contribution to fully comply with policy requirements;
• be informed by professional judgement and must be based upon the best available evidence
informed by cross sector collaboration; and
• Evidence used should reasonably identify any adjustments necessary to reflect the cost of
policy compliance (including for affordable housing), or differences in the quality of land, site
scale, market performance of different building use types and reasonable expectations of local
landowners.
We recognise the site is white land in a planning context and does not benefit from a residential consent.
However, the principle of residential use was not a point of contention from either NSDC or the Planning
Inspector at the February 2019 appeal. We also recognise that the core technical issues of highways,
flood risk, drainage, ecology and archaeology in respect of the previous planning applications were all
agreed in the Statement of Common Ground.
Furthermore, a pre-application meeting between my client and NSDC in August 2020 confirmed the
principle of residential development was acceptable on account of its windfall and greenfield site status
within the Sub Regional Centre of the defined Newark Urban Area.
We have been provided with the following comments by Chris Dwan of DLP Planning Limited:
Whilst the application site is not an allocated site within the Development Plan, it is a sustainably located
site that lies within the Newark Urban Area, as defined under Spatial Policy 1 of the Core Strategy. The
settlement hierarchy defined in Spatial Policy 1 identifies that the Newark Urban Area will be the focus
for housing and employment growth, and the main location for investment for new services and facilities
within the District. This is reiterated in Policy NAP1 of the Core Strategy and Policy DM1 of the
Allocations & Development Management DPD, confirming the Council will support the provision of 60%
of the overall District housing growth in the Newark Urban Area.
It has been established through the previous applications and appeals that the principle of residential
development on the site is acceptable, and this was not disputed by the Council or by the appeal
Inspector during the determination of any of the previous applications/appeals. Further, the core
technical aspects of the submission, such as, highways, flood risk / drainage, ecology, archaeology
were all agreed in respect of the previous appeal decisions. These matters were agreed in the
Statement of Common Ground that supported each appeal. The revised scheme has sought to address
the previous reasons for refusal and the Inspectors comments in dismissing the appeals (which did not
relate to the principle of development).
Having regard to the planning history of the site, discussions with NSDC and precedents set out
by the Planning Inspector in February 2019, we consider it reasonable to assume that the
principle of residential use is supported, albeit we accept there is an element of planning risk in
securing an implementable consent.
Avant Homes I C&W I 26On balance, we therefore anticipate that the reasonable, hypothetical landowner would
anticipate a land receipt in excess of CUV at £15,000 per gross acre.
Whilst viability guidance is silent on how an appropriate premium should be established, in considering
an appropriate uplift there are a number of sources available to us and we will provide comment on
each in turn.
6.4.1 Planning Decisions
We have interrogated legal precedents in order to provide an indication of what may be deemed an
appropriate landowner incentive, though clearly individual circumstances will dictate each case. We
have focussed on decisions post-July 2018, when NPPF viability guidance was refreshed.
The ‘Report on the examination of the draft North Tyneside Community Infrastructure Levy Charging
Schedule’, (published October 2018) discussed the principle of an appropriate premium. Here, the
Planning Inspector considers the principle of applying a 20-30 multiplier to CUV for greenfield sites, as
proposed by the Council’s consultants. The Inspector states: ‘I see little persuasive evidence that these
judgements are unreasonable’.
We are also aware of an appeal decision in respect of a site in Poulton-le-Fylde, Lancashire, where the
applicant submitted a FVA to support a scheme of 130 no. dwellings. To assess the BLV, the
consultants argued that an appropriate uplift equates to 15-25 as a multiplier of CUV for greenfield sites.
The appeal was allowed by the Planning Inspector in February 2020.
6.5 Market Evidence
Whilst a premium should suitably incentive the landowner to release the site for residential
development, it should also have regard to the market and thus, we consider comparable land
transactional evidence should serve as a cross-check, an approach fully consistent with NPPF viability
guidance.
We would comment that we do not consider it appropriate to establish BLV based on a multiplier alone,
as when not applied in the correct context it can be regarded as arbitrary with no regard to the market.
For that reason, we consider it paramount that comparable land transactional evidence should be
considered to provide an informed, holistic view of BLV adopting the CUV+ methodology. This approach
is fully consistent with viability guidance.
We have focussed on the land sales detailed within our market research and can provide the following
headlines:
• Bellway Homes, The Foresters – we have established through HMLR that Bellway acquired
the site in April 2018 for £3,135,000. We understand the gross site area is 1.68 ha (4.15 acres)
and in the absence of further information, have assumed a 5% gross to net discount, reflecting
3.9 acres. Our best estimate is that the site was therefore acquired for circa £800,000 per net
developable acre.
• Avant Homes, The Heddles – we are advised the site extends to a net developable area of
15.79 acres and was acquired for £12,404,600, reflecting £785,000 per acre.
The above schemes represent the most comparable new-build transactional evidence and indicate
values between £785,000 - £800,000 per net developable acre.
Avant Homes I C&W I 27You can also read
