Report GVA 10 Stratton Street London W1J 8JR Wichelstowe, Swindon Viability Assessment Swindon Borough Council October 2013 gva.co.uk
Wichelstowe Draft Affordable Housing Viability Assessment CONTENTS 1. INTRODUCTION... 1 2. THE PROPERTY... 3 3. PROPOSED DEVELOPMENT... 9 4. VIABILITY APPROACH... 11 5. SITE VALUE ( BASE VALUE )... 16 6. GROSS DEVELOPMENT VALUE... 18 7. DEVELOPMENT COSTS... 24 8. APPRAISAL FINDINGS... 26 Appendices Appendix I Confidential Appraisal Assumptions & Findings October 2013 gva.co.uk
1. Introduction 1.1 The following report is provided to support the Proposed Changes to the Wichelstowe development. The report included a number of private and confidential appendices which will be considered by the Local Planning Authority and their advisors. 1.2 GVA has been instructed by the Wichelstowe Project Team (the Applicant) to undertake an assessment of the economic viability of current development proposals for the remaining phases at Wichelstowe, generally referred to as Middle and West Wichel (the Property), covering c.200 hectares of land fully owned by Swindon BC. 1.3 The proposals for the Property are detailed in the Planning Statement and are referred to as the Proposed Changes. 1.4 The applications relate to the existing Outline planning permission granted in 2005 (S/02/2000/MWT) which provides for up to 4,500 homes, 830 homes of which are shortly due for completion at East Wichel. This permission includes a commitment to deliver 30% affordable housing. 1.5 The economic viability assessment has been undertaken to determine the underlying viability of these proposals, wherein previously agreed S106 contributions remain intact, but where differing levels of affordable housing provision are tested within the context of seeking to achieve a viable and deliverable scheme. 1.6 We have provided our assessment using a combination of a bespoke Excel cashflow which appraises the wider development, along with an Argus Developer (proprietary software) appraisal to further test serviced residential land values. 1.7 This assessment considers whether the proposed development can viably incorporate a policy compliant provision of 30% affordable housing, or if not whether an alternative provision is viable. 1.8 The development appraisal advice offered in this Report does not constitute a valuation, and cannot be regarded, or relied upon as a valuation. It does provide a guide for feasibility in line with the purpose for which the assessment is required. This advice is exempt from the current RICS Valuation Standards (the Red Book). 1.9 We have relied on information provided by the Applicant and its agents in terms of revised Land Use Masterplan (LUMP 2) phasing and cost assumptions. For example, we have based our cost assumptions on cost advice provided by Gardiner and Theobald.
Assumptions on capital values are based on evidence obtained through our own market research conducted locally. Assessor s Qualifications and Experience 1.10 The appraisals and report have been prepared by Oliver Maury MRICS, Associate Director within the Strategy and Delivery team with assistance from Emma Wyburd MRICS MRTPI. Oliver Maury is based in GVA s London office and has 10 years industry experience. 1.11 Oliver is a Development Surveyor with previous experience working with a Housing Association and a mixed tenure developer. He has been the Associate Director in London since 2010, having previously worked in GVA s Manchester office for five years. 1.12 Oliver has been retained by the Applicant to advise on viability for the proposed development since September 2012. Site Visit 1.13 Oliver Maury MRICS carried out an inspection of the Property on 25 th September.
2. The Property Area Context 2.1 Swindon is a unitary authority in the South West with a population of around 212,000, 66% of whom are aged between 16 and 64. The age/sex breakdown is shown in chart 1. The population is projected to grow by 14% between 2011 and 2021, establishing a usual resident population of around 239,000 in 2021(see chart 2). Figure 2.1: Swindon s population (2012 estimate) Population Swindon South West Great Britain All 211,900 5,339,600 61,881,400 Males 105,900 2,619,900 30,420,500 Females 106,000 2,719,700 31,460,900 Figure 2.2: 2011 population pyramid DCLG household projections
Figure 2.3: Swindon 2021 population pyramid projection DCLG household projections 2.2 Figure 2.2 shows a population ageing over time, with greater numbers of residents living longer and a larger proportion of the population in the over 50 age categories than in 2011. 2.3 There were, at the time of the 2011 census, around 91,000 dwellings within the borough, and an average of 2.3 persons per dwelling. In order to maintain this ratio and given the population projections, a further 13,000 homes will be required in Swindon by 2021. A projected fall in average household size would suggest this is a minimum requirement. 2.4 The majority of households in Swindon own their own home (64%). The proportions of people who live in social and privately rented accommodation (17% and 16% respectively) are broadly similar. The extent of home ownership is estimated to be slightly higher in the urban core of Swindon, around the town itself.
Figure 2.4: Tenure split comparison Swindon borough and Urban Core 2.5 The ratio of lower quartile house prices to lower quartile earnings (the affordability ratio) in Swindon has fallen below the England average in recent years (Chart 2.5). Figure 2.5: Affordability ratio comparison Swindon and England 2.6 A lower affordability ratio implies that the multiple of earnings (at the 25 th percentile level) required to buy a home (also 25 th percentile by price) is lower in Swindon than across the rest of the country on average i.e. a more affordable place to buy a home than average.
2.7 In the third quarter of 2012, according to DCLG/Land registry, the median house price in Swindon was 148,500 compared to an England median house price of 190,000. 2.8 Of Swindon s population a greater than average (for Great Britain) proportion (78%) are in employment. Although this proportion is lower than for the South West region as a whole (79%). Figure 2.6: Employment in Swindon Employment and Unemployment April 2012 - Mar 2013 All Swindon Swindon % South West % Great Britain % Economically active 108,600 78.2 78.8 77.1 In employment 99,600 71.7 73.9 70.9 Employees 85,600 61.8 62.4 60.9 Self employed 13,400 9.4 11 9.5 Unemployed 8,200 7.6 6 7.8 Figure 2.7: Employee jobs by sector (2008) Swindon, the South West Region and Great Britain 2.9 Figure 2.7 shows the proportion of employee jobs in Swindon by industrial sector. The categories that stand out are manufacturing and Finance, IT, other business activities. Swindon has a relatively high proportion of employees in these areas relative to the national and regional averages. This is probably due to the existence of several large national & international employers with head/major offices within Swindon.
2.10 The majority of those people who work in Swindon also live within the borough (78%). The breakdown of the inward commuter flows are shown in chart 2.8. As would be expected the majority of commuters from outside of Swindon come from the neighbouring local authorities, particularly Wiltshire with which there are historic links. Figure 2.8: Commuter flows into Swindon by local authority place of residence 2.11 In 2009, Swindon s Gross Value Added (GVA) per head was 27,616, the highest of the 12 NUTS3 areas in the South West. The value for the South West was 18,184 and England 20,498. 2.12 Over the last 10 years Swindon s GVA per head has increased by 26.4% (South West 43.2%, England 44.3%). This is the lowest increase for the 12 NUTS3 areas in the South West. Property Location 1.1 The Property is located to the South of Swindon bounded by the M4 to the south and the mainline railway line to the west. Property Description 2.13 Wichelstowe was conceived as three interconnected villages, East Wichel, Middle Wichel and West Wichel. The gaps between the villages were created primarily by site constraints, in particular floodplain and areas of ecological value. 2.14 Each village was planned to have a good degree of self-containment with its own local centre and primary school. Walkable neighbourhood principles underpin the planning of
the site ensuring that services, open space and schools are in close proximity to where people live. 2.15 The planning consent made provision for: no more than 4,500 dwellings (but a minimum of 3,800 dwellings); 111 hectares (275 acres) of open space; no more than 68,000 sq.m of B1 (employment) development in designated areas; no more than 5,650 sq.m of B1 development in mixed use areas; no more than 6,900 sq.m gross retail floorspace; no more than 4,330 sq.m of community use buildings including a library; 3no. Primary Schools and 1no. Secondary School; 1,000 space Park & Ride facility; construction of phase II of the Croft Road Hay Lane Link construction of 4,300 metres of new canal and associated canal infrastructure; and construction of development roads, footpaths, cycleways, drainage and associated infrastructure. Title 2.16 We have not seen a report on Title. We have valued the Property on the basis of an unecumbered freehold interest with vacant posession.
3. Proposed Development 3.1 The report focusses on the economic viability on the onward phases of mixed use development at Wichelstowe; that being the development areas referred to as Middle and West Wichel, which based on current density assumptions will deliver approximately 3,000 new homes (across c. 73 hectares), 12 hectares of employment land, a new District Centre and new schools. Application Scheme 3.2 The application comprises a Time Extension Application and a Section 73 Application which aim to: extend the timeframe against which reserved matters applications can be submitted; replace the consented LUMP with a new land use master plan (referred to as LUMP 2), prepared by LDA Design and Peter Brett Associates designed to reduce the infrastructure burden on the scheme whilst at the same time updating it to be better aligned with the current design standards and the market; change the timing of supporting infrastructure required to deliver the remaining elements of the 2005 OPP, and; reduce the level of affordable housing 3.3 The Proposed Changes are detailed in full in the Planning Statement. Planning Policy Context 3.4 Relevant current policies relating to Affordable Housing include: Emerging: Swindon Borough Local Plan 2026 (draft) Policy HA2: Affordable Housing Adopted: Swindon Borough Local Plan 2011 (saved 2009) Policy H10 The Provision of Affordable Housing in Larger Development Sites Policy Framework 3.5 The National Planning Policy Framework (March 2012) (NPPF), sets out the Government s planning policies for England and how these are expected to be applied. Further, the NPPF must be taken into account in the preparation of local and neighbourhood plans, and is a material consideration in planning decisions.
3.6 Key sections of the NPPF relevant to the viability testing are summarised below: In paragraph 173 the NPPF states that pursuing sustainable development requires careful attention to viability and costs in plan-making and decision-taking. Plans should be deliverable. Therefore, the sites and the scale of development identified in the plan should not be subject to such a scale of obligations and policy burdens that their ability to be developed viably is threatened. Paragraph 173 further states that to ensure viability, the costs of any requirements likely to be applied to development, such as requirements for affordable housing, standards, infrastructure contributions or other requirements should, when taking account of the normal cost of development and mitigation, provide competitive returns to a willing land owner and willing developer to enable the development to be deliverable. The principle of ensuring that the landowner, as well as the developer, gets a competitive return (even if the landowner is also the developer) has therefore been established. In paragraph 205 the NPPF states that where obligations are being sought or revised, local planning authorities should take account of changes in market conditions over time and, wherever appropriate, be sufficiently flexible to prevent planned development being stalled. The principle of evaluating market variations (i.e. values, costs) through scenario testing within the viability modelling is therefore established. Residential Development Mix 3.7 Given the unknowns around potential residential development mix, we have made broad assumptions for viability purposes based on assumed densities and typology mixes. 3.8 Further details of our assumptions on residential development mix can be found in Appendix I.
4. Viability Approach Context to Approach Adopted 4.1 A number of industry accepted best practice advice and guidance notes exist which respond to the need to test site-based development proposals for financial viability, as a basis for planning policy (including CIL) and development control. 4.2 The most recent and relevant of these is the Royal Institution of Chartered Surveyors (RICS) Financial Viability in Planning (October 2012). Also of note is Local Housing Delivery Group s (LHDG) - Viability Testing Local Plans Advice for Planning Practitioners (June 2012). This latter document provides a useful reference point for area-based proposals. 4.3 An evaluation of relevant key principles arising from this document is therefore provided below, forming a basis for the viability testing methodology adopted. Appraisal Framework 4.4 An objective test of financial viability for projects should be placed in the context of a well-established set of appraisal techniques and their applications. An accepted method of valuation of development schemes and land is the residual method1. This should be used for development situations where the direct comparison with other transactions is not possible due to the individuality of development projects. The residual appraisal can use the level of developer s return or a given Site Value as the benchmark for assessing the impact of planning obligations on viability. 4.5 Financial Viability Definition An objective financial viability test of the ability of a development project to meet its costs including the cost of planning obligations, while ensuring an appropriate Site Value for the landowner and a market risk adjusted return to the developer in delivering that project 2. In this case the Site Value to the landowner must be sufficient to persuade the landowner to sell the land for the development proposed. 4.6 Land Delivery vs Viable Development it is important to separate out these two key components of development. This is also consistent with the NPPF. Land must be willingly 1 RICS Valuation Information Paper (VIP) 12 for further detail. 2 RICS Financial Viability in Planning (October 2012) Pg 10.
released for development by landowners, whilst developers must be capable of obtaining an appropriate market risk adjusted return for delivering the proposed development. Depending on the nature and complexity of the scheme, development stages may be split across multiple parties creating different risk/return profiles. 4.7 Return to Developers and Landowners Any financial appraisal needs to have regard to the level of return to both landowner and developer, both to bring the site onto the development market but also to attract private investment into the development (where this is necessary). According to the RICS guidance the level of return or site value (implicitly including landowner return) should be benchmarked against/have regard to available comparable market based evidence. 4.8 Funding Any viability assessment needs to have regard to the availability of both public and private funding. 4.9 Site Value Key Considerations - In considering Site Value/Threshold Land Value (hereafter referred to as Site Value), it should be noted that, on large complex sites, there are additional costs of site assembly and planning promotion. These are an intrinsic and essential part of the process of delivering large sites. 4.10 For a development to be financially viable, any uplift from current use value to residual land value that arises when planning permission is granted should be able to meet the cost of planning obligations while ensuring an appropriate Site Value for the landowner and a market risk adjusted return to the developer in delivering that project. 4.11 The return to the landowner will be in the form of a land value in excess of current use value but it would be inappropriate to assume an uplift based on set percentages, given the diversity of individual development sites and local markets. 4.12 Site Value Basis Site Value, either as an input into a scheme-specific appraisal or as a benchmark, has been defined as follows: 4.13 Site Value will be based on market value, which will be risk-adjusted. The practitioner will have regard to Current Use Value (CUV), Alternative Use Value (AUV), market/ transactional evidence (including the property itself if that has recently been subject to a disposal/acquisition), and all material considerations including planning policy in deriving the Site Value 3. 3 RICS Financial Viability in Planning (1st Edition 2012)
4.14 Site Value ( Base Value ) - Approach Comparable evidence should be sought locally, wherein there is evidence that the Site Value offers a sufficient premium over current use value to persuade landowners to sell. 4.15 Sale prices of comparable development sites may provide an indication of the land value that a landowner might expect, but it is important to note that, depending on the planning status of the land, the market price will include risk-adjusted expectations of the nature of the permission and associated planning obligations. 4.16 Consideration should also be given as to whether land payments have been phased, and therefore the true Net Present Value of comparable data. 4.17 Purchase Price & Historic Costs It is for the practitioner to consider the relevance or otherwise of the actual purchase price, and whether any weight should be attached to it, having regard to the date of assessment and the definition of Site Value. Where historic costs (for example remediation works) are stated it is important that these are not reflected in the Site Value (i.e. double counted). 4.18 Holding Costs - The site will be valued at the date of assessment. Holding costs attributable to the purchase of the site should, therefore, not normally be allowed, as the Site Value will be updated. In phased schemes where land is valued at the beginning of the development and land is drawn down for each phase, it may be appropriate to apply holding costs. 4.19 Viability Cushion planning authorities should consider incorporating an appropriate viability cushion in the testing in order to ensure that the sites will, on the balance of probability, come forward as required. 4.20 Sensitivity Testing- It is strongly recommended that financial appraisals are sensitivity tested, as a minimum. For more complex schemes such as Wichelstowe, further scenario/simulation analysis should also be undertaken so as to ensure that a sound judgment can be formulated on viability. It is important that variations against baseline costs, as well as values, are tested and based, where appropriate, on construction cost and other indices. 4.21 Applicant Specific Assumptions - In undertaking viability assessments, the nature of the applicant should normally be disregarded, albeit the benefits or dis-benefits that are unique to the applicant may become a material consideration in establishing assumptions. The aim should be to reflect industry benchmarks having regard to the particular circumstances of the scheme.
Viability Testing Basis of Method 4.22 Given the complexity of the proposed scheme, in terms of scale, mix of uses, phasing and cashflowing, the financial viability testing has been undertaken using a bespoke viability model in Excel rather than adopting one of the proprietary "Toolkits". 4.23 The excel model is structured in a stacked manner, wherein the model breaks the financial appraisal down into component delivery elements (i.e. infrastructure, S106, development etc), treating each element in accordance with the most likely delivery route. This can be summarised as follows: 1. Site-wide development/ enabling cashflow produced showing the projected costs of relevant site enabling works (annualised) projected to be incurred by landowners/enablers to service development parcels. These projected costs include: a. Site promotion (incl. planning) and marketing; b. Development management and other professional fees; c. Primary and other infrastructure; d. Site remedial works; and e. Previously agreed S106 costs. 2. An inset appraisal derives a residual land value per net serviced residential acre (by use-category) by plot/phase (including developer profit); 3. Approximate serviced employment land values per net serviced commercial acre (by use-category) by plot/phase (taking into account developer profit); 4. Combined cashflow is then produced combining site enabling costs with projected residual land receipts per annum. This is then discounted at an appropriate discount rate (to reflect the return requirements of the enabler) to derive a Net Present Value (NPV). This cashflow is intended to reflect the enabler s position; and 5. The Net Present Value is then compared to the estimated Site Value (or Base Value ) as defined above and in Section 5, to determine overall scheme viability. 4.24 The base appraisal assumes no build cost inflation or value growth. However, sensitivities are run with these based on established industry benchmarks (i.e. market forecasts in context of historical market evidence). 4.25 Sensitivities are also with respect to affordable housing, wherein ranges of 0%, 15%, 20% and 30%.
4.26 We also highlight that the modelling does not account for 3 rd party agreements or interests, and it is assumed that a property is free of any onerous covenants, easements, other restrictions or liabilities including mortgages, grants and capital allowances which may affect the value.
5. Site Value ( Base Value ) 5.1 In using data on land values it is important to distinguish between headline values associated with fully serviced sites, as opposed to those net values which take account of infrastructure costs, Section 106 and CIL costs, and the costs of complying with existing and future policy requirements including the provision of affordable housing. It is also important to take into account the planning status of the site/associated transaction, including consideration of the risk and cost associated with obtaining planning permission. 5.2 Section 4 provides a detailed context for how Site Value within the viability testing should be established, including consideration of how the site and scheme specific characteristics of the Middle and West Wichel proposals should affect approach and methodology. 5.3 As noted the ideal scenario in this instance is to be able to source directly comparable land transactions in the locality; this being for large greenfield urban extension agricultural sites with outline planning permission, with residential-led mixed use redevelopment potential within a medium to long term time horizon, requiring significant promotional investment alongside major primary and secondary enabling infrastructure. 5.4 In this respect we note the following key comparables: Ridgeway Farm, Swindon (700 homes, Taylor Wimpey August 2013) greenbelt land with outline planning consent was sold to Taylor Wimpey for a value believed to be in region of 85,000 per gross acre. 5.5 In taking representations from landowners and/or site promoters in relation to Eastern Villages, for which we are advising the Council on viability, we have also been consistently quoted an input site value of 85,000 per gross acre. 5.6 We also note that the Swindon CIL Development Viability Study (GVA - 2012), which incorporated significant consultation with local stakeholders and review of local market comparables, assumed a benchmark land value of c. 100,000 per gross acre for urban extension greenfield sites. 5.7 On the basis of the evidence provided, we consider that a Site Value of circa 85,000 and 100,000 per gross acre is applicable at headline level, after which one must consider the following:
The risk-adjusted expectations of the nature of the existing permission and associated planning obligations (i.e. recognising that there may be a need for further review and/or iteration); Net values which take account site-specific abnormals such infrastructure and existing S106 costs; and The nature, expectations and objectives/requirements of the landowner (in this case the Local Authority).
6. Gross Development Value Introduction 6.1 The following section sets out the combined market research and resultant revenue assumptions applied to our viability appraisals when assessing the residual value of the serviced residential plots for Wichelstowe. Analysis 6.2 GVA has carried out a review of online data, contacted a range of local agents and visited a number of currently marketed new build developments in Swindon, in order to further detail the prevailing market conditions in Swindon both for all-market and for the new-build market at a view of prevailing pricing and unit sizing trends in the area. 6.3 According to the Zoopla website, which is based on formally recorded Land Registry data of sold properties, the average achieved price across all property types in Swindon was 177,188 in August 2013. Unsurprisingly, most of the sales in Swindon over the past year were terraced properties, which on average sold for 138,943. Semi-detached properties had an average sold price of 173,856 and detached properties averaged at 264,053. In the past year house prices in Swindon were similar to 2012, with 1.64% growth; however prices were 3.3% down on 2007 values. Figure 6.1: Property Value Data for Swindon Property type Avg. Asking Price Avg. per sq ft. Avg. # beds Avg. paid (last 12m) Detached 285,208 204 3.8 264,053 Semidetached 180,625 192 3.1 173,856 Terraced 143,276 175 2.7 138,943 Flats 121,649 180 1.8 105,615 Source: Zoopla/Land Registry 6.4 When we look at the range of asking prices across all unit types by bedroom number and include the number of units on the market in the past 12 months we can see that 3- bedroom houses were the most popular type of property for sale, followed by 4-bedroom
houses. There were a good amount of 2-bedroom flats on the market however this was still surpassed by the number of 2-bedroom houses marketed in 2012/13. Figure 6.2: Current asking prices in Swindon, Wiltshire Property type 1 bed 2 beds 3 beds 4 beds 5 beds Houses 197,791 (25) 140,963 (246) 185,491 (520) 302,872 (308) 478,581 (92) Flats 88,818 (112) 103,503 (204) 147,939 (5) - - All 108,703 (137) 123,981 (450) 185,134 (525) 302,872 (308) 478,581 (92) Source: Zoopla/Land Registry Swindon New Build Stock 6.5 The following plan illustrates those new build developments currently marketing in Swindon: Figure 6.3: Comparable Schemes - Swindon
6.6 A summary of associated asking prices, including unit sizes (where known), is provided below (excluding East WIchel): Figure 6.4: Currently Marketed New Build Developments Swindon (minus East Wichel) (September 2013) Plot Scheme Developer Type Beds Size (ft2 NIA) Quoted /sq ft 66 Terrace 4 1,190 219,995 185 Kingsdown 69 Barratt Gate Semi 3 875 189,995 217 71 Detached 4 1,202 247,995 206 Scheme Average 219,328 203 43 Apartment 2 128,995 Strata Bellway 45 Apartment 2 127,995 Scheme Average 128,495 86 Apartment 2 650 109,950 169 87 Apartment 2 694 115,000 166 88 Apartment 2 650 109,950 169 89 Apartment 2 694 115,000 166 90 Apartment 2 650 109,950 169 91 Apartment 2 611 105,000 172 92 Apartment 2 577 99,995 173 93 Apartment 2 643 109,950 171 98 Apartment 2 661 109,950 166 105 Apartment 2 577 99,995 173 186 Eagle Matthew Apartment 2 564 99,950 177 188 Heights Homes Apartment 2 564 99,950 177 Apartment Average 107,053 171 287 Terrace 3 1,174 195,000 166 100 Terrace 4 1,212 195,000 161 101 Terrace 4 1,212 195,000 161 122 Terrace 4 1,212 195,000 161 Terrace Average 195,000 162 264 Semi 3 1,206 195,000 162 272 Semi 4 1,212 205,000 169 Semi Average 200,000 165 109 Detached 5 2,193 320,000 146 Scheme Average 146,560 167 10 Terrace 2 600 144,995 242 29 Hazel Ridge Persimmon Terrace 3 893 189,995 213 Semi Average 167,495 227
47 Semi 2 600 154,995 258 64 Semi 3 892 199,995 224 Semi Average 177,495 241 65 Detached 3 892 204,995 230 Scheme Average 177,138 234 6 Apt 2 157,000 13 Apt 2 145,000 85 Marlborough Places for Apt 2 139,500 99 Park People Apt 2 138,000 181 Apt 2 137,000 1 Apt 2 129,000 Scheme Average 140,917 Okus Road Apt 1 99,950 Scheme Average 99,950 6.7 The analysis shows that the premium pricing (on /sq ft basis) in Swindon (outside of Wichelstowe) is currently being sought in the north east of the town, on Kingsdown Gate (average 203/sq ft) and Hazel Ridge (average 234/sq ft). 6.8 Interestingly Marlborough Park, which is close proximity to the Application site, is seeking the highest values for apartments across Swindon, at a quoted capital value range of between 129,000 and 157,000 (we do not have the dwelling sizes for the scheme). 6.9 Given the proximity of the development to the Application site, we have considered below currently marketed properties in Wichelstowe/East Wichel: Figure 6.5: Currently Marketed property at East Wichel (September 2013) Plot Scheme Developer Type Beds Size (ft2 NIA) Quoted /sq ft Apt 2 139,000 78 Terrace 2 641 139,000 217 72 Terrace 3 866 195,000 225 Terrace Average 167,000 221 51 Semi 4 1,169 240,000 205 East Taylor 96 Wichel Wimpey Semi 4 1,169 240,000 205 Semi Average 240,000 205 56 Detached 3 807 190,000 235 57 Detached 3 931 220,000 236 54 Detached 4 1,817 340,000 187 Detached Average 250,000 220
Scheme Average 212,875 216 6.10 From the table we may see that the scheme is currently quoting an average value of 216/sq ft, wherein terrace properties are seeking the highest average value of 221/sq ft, whilst semi-detached properties are seeking the lowest at 205/sq ft. 6.11 Sales are reportedly very strong on the scheme, particular since the Help to Buy Equity Loan scheme was launched in April 2013, in particular helping first time buyers to purchase properties with smaller deposits. Conclusions 6.12 The above analysis of comparable marketed schemes is encouraging in that it demonstrates a sound valuation platform for the Application site, given the relatively high values being sought in these later phases of at East Wichel (average 216/sq ft) and the high capital values being sought at nearby Marlborough Park for two bedroom apartments (average 140,917). 6.13 The average residential values assumed across the Application scheme are included in Appendix I. Affordable Housing 6.14 Within the serviced land parcel residual appraisals, we have been instructed to assume an affordable tenure mix of 70% Affordable Rent (at 80% Market Rent) and 30% Shared Ownership (assuming 40% equity share up front). 6.15 As part of the pre-application process, Sector Housing and Consultancy Services (now Capita) were instructed by the Applicant to review the capital values potentially attributable to these tenures. The calculations were undertaken using a discounted cashflow methodology (over 30 years), based on a turnkey deal with a registered provider. 6.16 The findings of this analysis, which we have used as a basis for the appraisal, is summarised in Appendix I. Ground Rents 6.17 Our assumptions on ground rents can be found in Appendix I.
Commercial Land Values 6.18 For appraisal purposes we have taken advice from GVA industrial, office and retail/leisure agents to determine an approximate serviced land value (per acre), which has then been added to the stacked appraisal according to currently forecast commercial land drawdown. These are detailed in Appendix I.
7. Development Costs Enabling Costs 7.1 The supporting/enabling infrastructure required to deliver the scheme has been fully and iteratively costed over many months, by Gardiner and Theobald in close liaison with Peter Brett Associates (Engineers) and the Wichelstowe Project Delivery Team within Swindon Borough Council. 7.2 The Proposed Changes amount to a reduction in infrastructure cost of approximately 30m (before contingency and fees) and a significant improvement in cashflow. The original phasing required investment of approximately 35m (excluding contingency and fees) within the first three years of development associated with the Croft Road Hay Lane Link and M4 tunnel. The revised phasing spreads the infrastructure costs over a greater period and more effectively balances income against receipts. 7.3 The current forecast costs as at the date of this report are provided in Appendix I. The costs are based on LUMP2, the revised Land Use Masterplan. 7.4 These costs have been carefully profiled and phased according to projected take-up and development phasing assumptions. Construction Costs Serviced Land Parcels 7.5 With regards to construction costs we refer to Appendix I, the serviced plot cost plan provided by Gardiner and Theobald which is based on a sample phase of development (Plot MW10) at Wichelstowe. 7.6 This accounts for all costs associated with developing a serviced land parcel, including highways, servicing, public realm and landscaping etc., which we have then applied on a pro-rata basis to review economic viability across the rest of the site. 7.7 Affordable housing construction costs have been applied at a 10% discount, based on previous advice from Gardiner and Theobald. Other Development Costs Serviced Land Parcels 7.8 We have made the following additional assumptions:
Figure 7.1: Other Development Costs Item Amount Linked Professional Fees 8% Cost Contingency 5% Cost Private Residential Marketing & Sales fee 2% Resi GDV Sales Agent Fee 1.0% Resi GDV Sales Legal Fee 0.5% Resi GDV Finance 6.5% Net Cashflow SDLT Standard Residual Value Planning Obligations/S106 7.9 No new mitigation requirements have been identified since the original Land Use Masterplan. As such we have maintained the same profile (by trigger mechanism) and level of S106 obligations as the existing outline planning permission. 7.10 These can be found in Appendix I. Development Management & Site Promotion Fees 7.11 These are the costs associated with servicing the land, as incurred by the site promoter(s). 7.12 These can be found in Appendix I. Margin/Profit 7.13 For the purposes of the serviced parcel residential residual land appraisals we have assumed a range of enabler and developer-related margins. These can be found in Appendix I.
8. Appraisal Findings 8.1 Appendix I details the specific appraisal and financial modelling findings. 8.2 The viability results indicate that the value of land to the Council at any level of affordable provision is far lower than the current market value of around 85,000 per acre, and this supports the removal of all affordable housing on viability grounds. 8.3 Although the Council is the Developer (as part of a proposed 50/50 Joint Venture partnership), there is recognition that there are wider Council objectives to take into consideration. We have therefore identified a number of routes through which we believe it will be possible to secure a level of affordable provision of at least 15%. This would be achieved through: The Council s overall objectives for the site in that it may wish to recycle any expected profits back into the site, secure external funding or structure financing arrangements in a way that defers its returns in order to improve overall financial viability; Further review of site-specific abnormals and S106 costs; Further development of an Older Peoples provision on Wichelstowe through which the Council intend to provide a significant element of affordable housing; Review the structure and delivery of alternative affordable tenure structures that are more financially viable than standard affordable models; On-going review of market fluctuations including projected residential sales value growth. 8.4 Despite the overall viability supporting no affordable housing, for the reasons above the Council will be seeking to deliver at least 15%. A review mechanism will be agreed with the Local Planning Authority whereby the viability position will be assessed on a regular basis and the level of affordable housing provision adjusted up to a maximum of 30% in line with Council planning policy.