DONCASTER LOCAL PLAN VIABILITY
TESTING
Completed on behalf of
Doncaster Metropolitan Borough Council
by
District Valuer Services (DVS)
August 2016
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EXECUTIVE SUMMARY
1. We have been commissioned by Doncaster Metropolitan Borough Council (“the
Council”) to undertake an area wide viability study, specifically to consider the impact
Council policies, as well as market fluctuations, have on scheme viability.
2. We have been instructed to assess a sample of hypothetical sites across the Borough,
to include both residential schemes and non-residential developments (i.e. office,
industrial, leisure developments etc.).
3. This assessment has been undertaken specifically for the purposes of a Whole Plan
Viability Study. Its intention is to consider broad average viability appraisal inputs
across the area of the study, and not set precedents for individual site viability
assessments. In other words, the high level findings of this study should not be used
to inform individual viability appraisals of ‘real’ development sites, which (as per the
guidance) will need to be undertaken on a site by site basis reflecting the specific
nature of the land in question.
4. This assessment has been undertaken in the context of the National Planning Policy
Framework (“NPPF”) and Planning Practice Guidance (“PPG”), as well as the relevant
professional guidance; “Viability Testing Local Plans” June 2012 by the Local Housing
Delivery Group (“The Harman Review”) and “Financial viability in planning” August
2012 by the Royal Institution of Chartered Surveyors (RICS).
5. As part of the process, in line with the guidance, we have actively engaged with
stakeholders to help ensure the assumptions adopted within the appraisal are realistic.
In this case, we arranged a Stakeholder Workshop to allow an open forum discussion
on viability matters. This was attended by a variety of key stakeholders; including land
owners, agents, planning consultants, house builders, various representatives from
different Council departments, as well as external public sector bodies. Following this
workshop, a questionnaire was circulated to all identified stakeholders (including those
unable to attend the workshop) seeking further details on their views on viability
matters. The workshop and returned questionnaires formed part of the evidence base
of the conclusions reached.
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6. In accordance with the guidance, we have adopted the residual approach to site
testing, which involves identifying the sales revenue for the completed scheme, and
from this deducting the relevant costs of delivering the project (including the site value
and developer’s profit).
7. As part of our review, we have adopted ‘sensitivity analysis’. This involves running a
number of appraisal scenarios, varying key appraisal inputs to determine the impact
these changes could have on the overall viability. This iteration process allows a more
robust assessment of viability and is recommended within the guidance.
8. For the residential sites, we have concluded that land located within ‘high’ value areas
are comfortably viable with the Council’s proposed affordable housing provision of
25%, together with various other draft S106 policies. However, for sites located within
‘medium’ and ‘low’ value areas, the viability pressure is greater. Having run various
scenarios, for sites in medium and low value areas we have concluded that it is
appropriate to adopt a reduced affordable housing provision of 15%.
9. For non-residential sites, we have concluded that supermarket, strategic warehouse,
hotel and town centre shop schemes are all viable, even with the application of the
Council’s draft policies. However, we have concluded that industrial and office
schemes are currently unviable, even if the Council policies are removed. This is due
to macro-economic factors affecting these market sectors. The only scheme type that
sees a significant benefit in reducing the Council policies is non-strategic warehousing,
which improves from being marginally viable to viable when the policies are reduced
(or removed).
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Summary Schedule – Key ‘Basic’ Viability Assumptions (Residential)
Appraisal input Assumptions
Gross to net ratio
< 0.5 Ha 100%
0.5 – 2.0 Ha 85%
2.0 – 5.0 Ha 80%
> 0.5 Ha 75%
Scheme density 35 dwellings per net Ha
Average house size 92.90 sq. m (1,000 sq. ft.)
Affordable rent transfer values
45% of market value
Shared ownership transfer values
67.5% of market value
Starter homes discount 80% of market value
Average ‘basic’ build cost BCIS lower quartile – £798 per sq. m
BCIS median – £900 per sq. m
External / site infrastructure costs
15% of the basic build cost
Contingency
Greenfield – 3% of basic build costs Brownfield – 5% of basic build costs
‘Abnormal’ development costs Greenfield – £100,000 per net Ha
Brownfield (cleared) – £200,000 per net Ha
Brownfield (occupied) – £300,000 per net Ha
Professional fees
Sub 20 dwellings – 8% of basic build costs / externals Over 20 dwellings – 6% of basic build costs / externals
Marketing costs Sub 10 dwellings – 1.5% of sales revenue Over 10 dwellings – 3% of sales revenue Plus additional allowance for legal costs at £500 per dwelling
Developer’s return Sub 10 dwellings – Market Value / Starter Homes 15% of sales revenue, Affordable rent / Shared ownership 8% of cost Over 10 dwellings – Market Value / Starter Homes 18.5% of sales revenue, Affordable rent / Shared ownership 8% of cost
Finance costs Sub 10 dwellings – 7% debit Over 10 dwellings – 6% debit
Average sales values Low value area – £1,500 per sq. m Medium value area – £1,750 per sq. m High value area – £2,250 per sq. m
Threshold Land Values Greenfield Low value area – £197,680 / Ha (£80k / acre)
Greenfield Medium value area – £271,810 / Ha (£110k / acre)
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Greenfield High value area – £345,940 / Ha (£140k / acre) Brownfield (cleared) – £185,325 / Ha (£75k / acre) Brownfield (occupied) – £370,650 / Ha (£150k / acre)
Summary Schedule – Key ‘Basic’ Viability Assumptions (Non-Residential)
Appraisal input Assumptions
Gross to net ratio
Hotel / town centre shop 100%
Strategic warehouse 90%
Industrial / non-strategic warehouse 80%
Supermarket / offices 75%
Type of disposal Speculative – Industrial / office / town centre shop
Pre-let – Hotel / warehousing / supermarket
Lease length for tenant 15 years
Rent free period 12 months
Average ‘basic’ build cost - Strategic warehouse £446 per sq. m
- Non-strategic warehouse £446 per sq. m
- Industrial (2,000 to 10,000 sq. m) £446 per sq. m
- Supermarket (small and large) £951 per sq. m
- Office 500 sq. m £1,228 per sq. m
- Office 200 sq. m £1,052 per sq. m
- Town centre retail £644 per sq. m
- Hotel £1,405 per sq. m
External / site infrastructure costs
10% of the basic build cost
Contingency
3% of basic build costs
Professional fees
8% of basic build costs / externals
Marketing costs Letting – 15% of the annual Market Rent
Investment sale – 1.5% of the sale price agreed
Both include a legal fee
Developer’s return Speculative – 15% on cost
Pre-let – 12.5% on cost
Finance costs 6% debit
Average sales values Rent and yield approach, as detailed within the main body of the report below
Threshold Land Values Brownfield (cleared) – £185,325 / Ha (£75k / acre)
Greenfield – £271,810 / Ha (£110k / acre)
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CONTENTS
1. INTRODUCTION Pg. 8 Instruction 8
2. VIABILITY METHODOLOGY 9
National Planning Policy Framework (“NPPF”) 9 Planning Practice Guidance (“PPG”) 9 Professional Guidance for Viability Assessments 12 The Financial Appraisal Model / The 'Residual' Method 16 Stakeholder engagement 20 Summary 21
3. RESIDENTIAL - VIABILITY ASSUMPTIONS 22 Introduction 22 Site Types 22 Gross and Net Developable Areas 23 Capacity / Density 25 Dwelling Mix and Sizes 26 Specification 29 Affordable Rented Assumptions 29 Intermediate / Shared Ownership Assumptions 32 Starter Homes 32 Market Value Sales Revenue 33 'Basic' Build Costs 34 Externals / Infrastructure 37 Contingency 40 Abnormal Development Costs 42 Professional Fees 44 Marketing 45 Developer's Profit 47 Finance 50 Threshold Land Value 51 Site Acquisition and Disposal Costs 52 Section 106 Contributions / Emerging Policy Aspirations 52 Scenario testing / sensitivity analysis 54
4. RESIDENTIAL – APPRAISAL RESULTS 56 Introduction 56 Test 1 – Council policies (bar affordable housing), BCIS lower quartile 56 Test 2 – Council policies (bar affordable housing), BCIS median 59 Test 3 – Estimated costs linked to council policy CCMRE3 are removed 61 Test 4 – Sales revenue increased by 5% 64 Test 5 – Starter Homes 66
Test 6 – All draft Council planning policies removed 69 Conclusions 71
5. NON-RESIDENTIAL – VIABILITY ASSUMPTIONS 72 Introduction 72 Site type 72 Methodology 73 Evidence 73 Scenario testing / sensitivity analysis 78
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6. NON-RESIDENTIAL – APPRAISAL RESULTS 80
Introduction 80 Test 1 – Council policies 80 Test 2 – Excludes all Council policies 81 Test 3 – Excludes all Council policies except for flood risk mitigation costs 82 Conclusions 83
7. FINAL COMMENTS 84
Table A - Settlement Value Areas 23 Table B - Development type and viability tests 23 Table 1 – Minimum gross internal floor areas and storage (sq. m) 28 Table 2 – Sample of rented modern houses & affordable rent calculation 31 Table 3 – Test 1 Urban extension viability results 57 Table 4 – Test 1 Urban settlement viability results 58 Table 5 – Test 2 Urban extension viability results 59 Table 6 – Test 2 Urban settlement viability results 60 Table 7 – Test 3 Urban extension viability results 62 Table 8 – Test 3 Urban settlement viability results 63 Table 9 – Test 4 Urban extension viability results 64 Table 10 – Test 4 Urban settlement viability results 65 Table 11 – Test 5 Urban extension viability results 67 Table 12 – Test 5 Urban settlement viability results 68 Table 13 – Test 6 Urban extension viability results 69 Table 14 – Test 6 Urban settlement viability results 70 Table 15 – Non-residential Market Rent and yield ranges 74 Table 16 – Non-residential key appraisal inputs 75 Table 17 – Test 1 Council policy appraisal results 80 Table 18 – Test 2 No Council policy appraisal results 81 Table 19 – Test 3 No Council policy (except flood risk mitigation) appraisal results 82
APPENDIX 1 – Doncaster Housing Market Review 86 APPENDIX 2 – Threshold Land Value Assessment 104 APPENDIX 3 - Map to Illustrate High, Medium and Low Value Areas 127
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1. INTRODUCTION
1.1 Instruction
1.1.1 Doncaster Metropolitan Borough Council (“the Council”) is currently in the
process of developing a Local Plan. As part of this process the Council is
looking to ensure, through a robust evidence assessment, that the Local Plan
will be deliverable and viable.
1.1.2 In the context of the above District Valuer Services (“DVS”), part of the Valuation
Office Agency, has been commissioned by the Council to undertake viability
appraisals of a sample of hypothetical sites across the Borough, to include both
residential schemes and non-residential developments (i.e. office, industrial,
leisure developments etc.). Please note, the scope of this instruction specifically
excludes large urban extension housing schemes 400+ units, which will be dealt
with separately if any such allocations are proposed through the Local Plan.
DVS provides valuation advice to public bodies throughout the UK. It has
extensive experience in undertaking development appraisals and employs
specialists in development work.
1.1.3 Please note, this document has been prepared specifically for the purposes of
a Whole Plan Viability Study. Its intention is to consider broad average viability
appraisal inputs across the area of the study, and not set precedents for
individual site viability assessments. In other words, the high level findings of
this study should not be used to inform individual viability appraisals of ‘real’
development sites, which (as per the guidance) will need to be undertaken on
a site by site basis reflecting the specific nature of the land in question.
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2. VIABILITY METHODOLOGY
2.1 National Planning Policy Framework (“NPPF”)
2.1.1 Whole Plan Viability Assessments should be undertaken in the context of the
National Planning Policy Framework (“NPPF”) March 2012. This has a section
entitled “Ensuring viability and deliverability”:
“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. 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”. (Paragraph 173)
“Local planning authorities should set out their policy on local standards
in the Local Plan, including requirements for affordable housing. They
should assess the likely cumulative impacts on development in their
area of all existing and proposed local standards, supplementary
planning documents and policies that support the development plan,
when added to nationally required standards. In order to be appropriate,
the cumulative impact of these standards and policies should not put
implementation of the plan at serious risk, and should facilitate
development throughout the economic cycle. Evidence supporting the
assessment should be proportionate, using only appropriate available
evidence.” (Paragraph 174)
2.2 Planning Practice Guidance (“PPG”)
2.2.1 Furthermore, a Whole Plan Viability Assessment should also have regard to
Planning Practice Guidance, including specifically:
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Stakeholder engagement
“Collaboration: a collaborative approach involving the local planning
authority, business community, developers, landowners and other
interested parties will improve understanding of deliverability and
viability.” (Paragraph 004, as revised March 2014)
Viability in plan-making
“Local Plans and neighbourhood plans should be based on a clear and
deliverable vision of the area. Viability assessment should be
considered as a tool that can assist with the development of plans and
plan policies. It should not compromise the quality of development but
should ensure that the Local Plan vision and policies are realistic and
provide high level assurance that plan policies are viable.
Development of plan policies should be iterative – with draft policies
tested against evidence of the likely ability of the market to deliver the
plan’s policies, and revised as part of a dynamic process.
Evidence should be proportionate to ensure plans are underpinned by
a broad understanding of viability. Greater detail may be necessary in
areas of known marginal viability or where the evidence suggests that
viability might be an issue – for example in relation to policies for
strategic sites which require high infrastructure investment.” (Paragraph
005, as revised March 2014)
Approach to testing
“Assessing the viability of plans does not require individual testing of
every site or assurance that individual sites are viable; site typologies
may be used to determine viability at policy level. Assessment of
samples of sites may be helpful to support evidence and more detailed
assessment may be necessary for particular areas or key sites on which
the delivery of the plan relies.” (Paragraph 006, as revised March 2014)
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Approach to costing
Plan makers should consider the range of costs on development. This
can include costs imposed through national and local standards, local
policies and the Community Infrastructure Levy, as well as a realistic
understanding of the likely cost of Section 106 planning obligations and
Section 278 agreements for highways works. Their cumulative cost
should not cause development types or strategic sites to be unviable.
Emerging policy requirements may need to be adjusted to ensure that
the plan is able to deliver sustainable development.” (Paragraph 007, as
revised March 2014)
Approach to market changes
Plan makers should not plan to the margin of viability but should allow
for a buffer to respond to changing markets and to avoid the need for
frequent plan updating. Current costs and values should be considered
when assessing the viability of plan policy. Policies should be
deliverable and should not be based on an expectation of future rises in
values at least for the first five years of the plan period. This will help to
ensure realism and avoid complicating the assessment with uncertain
judgements about the future. Where any relevant future change to
regulation or policy (either national or local) is known, any likely impact
on current costs should be considered”. (Paragraph 008, as revised
March 2014)
Competitive return
The National Planning Policy Framework states that viability should
consider “competitive returns to a willing landowner and willing
developer to enable the development to be deliverable.” This return will
vary significantly between projects to reflect the size and risk profile of
the development and the risks to the project. A rigid approach to
assumed profit levels should be avoided and comparable schemes or
data sources reflected wherever possible.
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A competitive return for the land owner is the price at which a reasonable
land owner would be willing to sell their land for the development. The
price will need to provide an incentive for the land owner to sell in
comparison with the other options available. Those options may include
the current use value of the land or its value for a realistic alternative
use that complies with planning policy.” (Paragraph 015, as revised
March 2014)
2.2.2 In undertaking a Whole Plan Viability Assessment it is therefore vital to adopt
an evidence based approach, which seeks to ensure that any Council policies
do not undermine viability.
2.3 Professional Guidance for Viability Assessments
2.3.1 Surveyors are now assisted by two relatively recent publications, although the
guidance between each is somewhat contradictory. We have commented on
each publication as follows:
“Financial viability in planning” August 2012 by the Royal Institution of
Chartered Surveyors (RICS):
Para 2.5.2, Box 10, “…nature of the applicant should normally be disregarded
as should the benefits or dis-benefits that are unique to the applicant.”
2.3.2 Thus, appraisals should be done assuming hypothetical, typical landowners and
developers and the views and aspirations of the actual owner are not relevant
if these views differ from general market practice.
Para 2.3.2, Box 7, “Site value should equate to the market value subject to the
following assumption: that the value has regard to the development plan
policies and all other material planning considerations and disregards that
which is contrary to the development plan.”
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2.3.3 As indicated above, this refers to the site value as usually being assessed by
means of a residual development appraisal. However, the suggestion seems to
be that planning policies should be fixed and land value subject to change
(which contradicts the view of the landowner having a minimum land value
below which they would sell).
Para 2.1.2 “It follows, for example, that the land value is flexible and not a fixed
figure to the extent that Site Value has to be determined as part of the viability
assessment.”
2.3.4 This appears to support the above view that it is the Council’s policy which
drives the land value, not the other way round. However, the RICS document
does acknowledge that the flexibility in land value cannot result in the value
going below the Current Use Value (“CUV”), stating:
Para 3.4.4 “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.”
2.3.5 This appears to support the view of setting a land value (often referred to as the
“Threshold Land Value” or “TLV”) for development appraisals, which is to
somehow be linked to the Current Use Value (“CUV”). However, no guidance is
given as to how to determine the link between the CUV and the TLV.
2.3.6 Furthermore, in particular no guidance is given to assessing greenfield land,
where the CUV may only be £12,500 - £25,000 per Ha and clearly a TLV only
slightly above the CUV would not represent a sufficient incentive for a
landowner to sell for development.
“Viability Testing Local Plans” June 2012 by the Local Housing Delivery
Group (“The Harman Review”).
Pg. 29 “We recommend that the Threshold Land Value is based on a premium
over current use values and credible alternative use value (noting the
exceptions below)”.
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2.3.7 This therefore contradicts the guidance provided by the RICS, where adopting
a percentage uplift above the CUV is not recommended.
2.3.8 One of the exceptions referred to relates to “non-urban” and “greenfield” sites.
Pg. 30 “It is widely recognised that this approach [i.e. a percentage increase
over CUV] can be less straight forward for non-urban sites or urban
extensions, where land owners are rarely forced or distressed sellers…This is
particularly the case in relation to large greenfield sites…Accordingly, the uplift
to current use value sought by the landowners will invariably be significantly
higher than in an urban context and requires very careful consideration”.
2.3.9 This does not mean that an assessment of the CUV has no part to play in the
process of assessing greenfield sites. A typical landowner will still want to know
what the value of his/her site is without the planning permission applied for, and
then judge by how much, if at all, the CUV increases when planning consent is
granted. The difference is that, for urban brownfield sites a premium uplift of
circa 25% – 50% of the CUV may be deemed sufficient to incentivise a
landowner to sell (e.g. if the CUV is £200,000 per Ha, applying a 50% uplift
would mean a TLV of £300,000 per Ha, which would be attractive to a
landowner). For a greenfield site, if the CUV is only say £10,000 per Ha then a
50% uplift (i.e. a TLV of £15,000 per Ha) would clearly not incentivise a
landowner to release the land for development. In reality, the ‘uplift’ would need
to be more like 15 – 25 times (or more) the CUV.
2.3.10 In terms of how to evidence the approach to greenfield sites the document goes
on to say:
Pg. 30 “…local sources should be used to provide a view on market values (the
‘going rate’), as a means of giving a further sense check on the outcome of the
current use plus premium calculation”.
Pg. 30 “…for sites of this nature [i.e. greenfield], it will be necessary to make
greater use of benchmarks, taking into account of local partner views on market
data and information on typical minimum price provisions used within developer
/ site promoter agreements for sites of this nature”.
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2.3.11 This therefore seems to advocate using evidence of TLVs identified as part of
the viability process, as well as using market transactions as a general ‘sense
check’.
2.3.12 However, it is stressed that there are limitations of assessing land sales.
Assessing actual land sales for the purposes of identifying a TLV is not straight
forward, as the price someone is willing to pay for a piece of development land
(and indeed accept for a piece of development land) is subject to many factors,
which includes:
- The type of development that could be brought forward.
- The gross to net ratio (it may be that a large section of the site is constrained
and cannot be developed).
- The potential density of any proposed scheme.
- Whether any third parties benefit from a ransom position preventing access
to the site.
- Whether there are any title constraints.
- The abnormal costs associated with developing the site (i.e. any untypical
cost, such as deep pile foundations to mitigate ground concerns, flooding
mitigation works etc.).
- The planning policies that relate to a specific type of scheme.
- Whether a purchaser benefits from synergistic value with any neighbouring
land they already own or will own in the future.
- Whether a vendor is under financial pressure to sell.
- Whether a house-builder is keen to have a presence in a particular location
etc.
2.3.13 There are therefore a number of factors which impact the price someone is
willing to pay for development land, because ultimately each development site
is unique. For example, you could have 2 sites next to each other sold at the
same time, each being 5 Ha and the same shape. However, one may have
significant flooding issues and a poor access route, whereas the other may have
no concerns. The price paid for the land affected by ‘abnormal’ development
costs (i.e. in this case flooding and a poor access route) would therefore most
likely be significantly less than the unaffected site. The reasons for the
difference in value, though, would not be identifiable by simply looking at the
price paid for the land on a ‘per Ha’ basis.
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2.3.14 This means it is extremely difficult to compare two land transactions because in
reality only some of the factors outlined above (which is not an exhaustive list)
will be known to the analysing surveyor.
2.3.15 In this respect, land transactions are useful in providing a ‘sense check’ but they
should not be regarded as providing a definitive view on threshold land values,
particularly on a ‘price per Ha’ basis, because in most cases the full details of
the transaction (and the factors which impact value) will not be known. Land
sales should therefore be considered after the other sources of evidence are
identified, and provide a ‘sense check’ only.
2.4 The Financial Appraisal Model / The ‘Residual’ Method
2.4.1 The professional guidance advocates adopting the ‘residual’ method when
considering viability assessments. This is an established valuation approach,
which as a concept is relatively straight forward and can be illustrated by the
following equation:
Gross Development Value (i.e. Total Revenue)
Less
Development Costs (Land Acquisition + Construction + Fees + Finance)
Equals
Residue for Developer’s Profit and Risk
2.4.2 However, please note it is not a requirement of an appraisal that the residue is
always equal to the developer’s profit. The model can be amended so that
developer’s profit is a fixed input and say the land value is shown as the residue.
If this were the case the model would be amended to:
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Completed Development Value (i.e. Total Revenue)
Less
Development Costs (Developer’s Profit and Risk + Construction + Fees + Finance)
Equals
Residue for Land Acquisition
2.4.3 Equally, the land value and developer’s profit can be inputted as fixed figures,
representing the minimum profit and minimum land value considered necessary
for the scheme to be implemented. The subsequent residue could therefore be
used to show the monies available for planning policy contributions (for
example).
2.4.4 Whilst a simple concept, it is stressed that in reality the residual method often
becomes a complicated and detailed approach. This is because the
methodology inherently requires a wide variety of inputs to be factored into the
assessment, all of which are subject to variance (e.g. sales values, build costs,
professional fees, abnormal works, Council policies, profit, marketing, finance
etc.). All of these inputs need to be considered carefully, as potentially relatively
small variances to one or two inputs could have a significant impact on the
results of the assessment. This inherent flaw in the methodology is recognised
by the RICS and wider industry, and as a result ‘sensitivity’ testing is
recommended to try and minimise the impact of these potential variances.
Nevertheless, the industry still considers this to be the most appropriate
methodology for assessing development sites and appraising viability.
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2.4.5 Notwithstanding the flaws in the methodology, for the purposes of a Whole Plan
Viability Assessment, and based on our experience, we would advocate the
approach of fixing the land value and the developer’s profit at average levels
considered appropriate for the scheme to be implemented, which would then be
inputted into an appraisal together with all the other general costs of
development (including build costs, professional fees, finance etc.). However,
at this point any affordable housing contributions or CIL charges would be
excluded from the appraisal. The costs would then be deducted from the Gross
Development Value (or total revenue). If the appraisal produces a surplus, this
surplus could then be shared out as Planning Policy contributions. If the scheme
produces a deficit the scheme would be regarded as being unviable, even
without any Planning Policies applied.
2.4.6 The advantage of approaching the viability assessment in this way is that the
appraisal would clearly show whether a scheme was viable or not (by
demonstrating a surplus or a deficit). If the scheme did produce a surplus, and
was subsequently regarded as being viable, then at this point Planning Policies
could be built into the appraisal and the viability re-tested on a ‘trial and error’
basis until an agreed point.
2.4.7 The negative side to this approach is that there would have to be a pre-
determined ‘level’ at which a scheme was regarded as being acceptably viable.
The most obvious level in this regard would be if the scheme resulted in a ‘zero’
return (or thereabouts), in other words the scheme neither produced a surplus
nor produced a deficit.
2.4.8 However, some may argue that this is at the ‘extremes’ or ‘breaking point’ of
viability, and therefore is not in line with the sentiment of the NPPF or PPG. In
this respect, setting a pre-determined level of surplus above a ‘zero’ return
would provide a suitable ‘buffer’, minimising the risk of the Planning Policies
undermining viability.
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2.4.9 That said, in our experience, if a scheme produced a relatively small deficit then
this would not undermine implementation, as a developer would look to
potentially renegotiate the land value, consider value engineering or simply
accept a slightly reduced profit margin as a means of ensuring the scheme was
still undertaken. In other words, and based on our experience, we do not believe
that a developer would ‘walk away’ from a scheme if it ultimately produced a
small deficit. In this regard, it can be considered that there is already an implicit
buffer allowance in a viability appraisal, therefore a scheme producing a zero
return would not be at the extremes or breaking point of viability, as the reality
is a developer would allow a small amount of ‘flex’ in their profit margin / build
costs to cover such eventualities.
2.4.10 Scenario testing / sensitivity analysis can also be used to ensure robust
conclusions are reached (an approach advocated in the PPG and the relevant
viability guidance), helping to minimise the risk of the Council’s policies
undermining viability and limiting deliverability. This involves running a number
of scenarios based on variables in key inputs. For example,
(i) Variances in costs
(ii) Variances to developer’s profit
(iii) Variances in Council Policies
(iv) Changes in time – inflation rates applied to certain inputs, such as
houses and sales and build costs
2.4.11 The purpose of the scenario testing / sensitivity analysis is an attempt to
consider likely variations within the appraisal model, essentially with a view to
identifying the best and worst case positions of viability. From this more robust
conclusions can be reached in terms of viability.
2.4.12 That said, we would stress that ‘over testing’ can produce excessive data which
can prove more difficult to analyse (making it difficult to reach meaningful
conclusions). Scenario testing / sensitivity analysis is a useful tool in Whole Plan
testing, however in our view this should be limited to a handful of key scenarios.
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2.5 Stakeholder engagement
2.5.1 The NPPF and PPG, as well as the Harman Review, advocate stakeholder
engagement in the preparation of a Local Plan and the process of undertaking
a Whole Plan viability assessment. This is an important step in helping ensure
planning policies are set at realistic levels which do not undermine the viability
and deliverability of sites.
2.5.2 Based on past experience of undertaking Whole Plan viability assessments, and
having considered the approach other Local Authorities have taken to
stakeholder engagement (particularly paying attention to examples of Local
Plans which have been examined and approved by the Planning Inspectorate),
we have adopted the following approach:
- Stakeholder Workshop 1: a meeting was held at the Council offices on 1st
June 2016. Stakeholders (including developers, house builders, planning
consultants, agents, landowners, public sector bodies etc.) were invited to
attend. The invitation was also published on the Council’s website as an
open invite for any other interested stakeholders to attend the workshop.
The format was an open forum discussion, albeit DVS used a power-point
presentation as a prompt for discussion on key viability appraisal inputs.
This gave stakeholders the opportunity to provide some initial thoughts on
key viability assumptions, allowing them to challenge and be challenged on
their views.
- Questionnaire: after the workshop those who attended (and those who were
unable to attend) were sent a “Viability Questionnaire and Evidence Trawl”
seeking the views of the stakeholders on key appraisal inputs. This gave an
opportunity to stakeholders to provide more considered comments on key
viability appraisals and submit supporting evidence. 3 completed
questionnaires were sent back to DVS.
- Stakeholder Workshop 2: the initial intention was to hold 2 Workshops, with
the second workshop an opportunity to discuss initial testing results and
also any outstanding queries on appraisal inputs. However, there was a lack
of response from the stakeholders to the option of a second workshop. This,
21
combined with the limited response to the questionnaire, meant the decision
was taken not to hold a second workshop.
2.5.3 We would stress that we have not simply looked to follow the views of the
stakeholders, and have instead assessed all of the evidence identified with a
view to reaching an independent view. The stakeholder workshops /
questionnaire was an important part of the evidence base identified.
2.6 Summary
2.6.1 The NPPF and PPG is clear that Council Policies should not be set at levels
which could potentially undermine the viability and deliverability of development
projects. Whole Plan viability assessments should be undertaken in this context.
2.6.2 The relevant professional guidance advocates the use of the residual method
for the assessment of viability. This is an established and RICS approved
valuation methodology.
2.6.3 That said, there are inherent flaws in the residual method, due to the wide
number of inputs often required, each of which are potentially subject to
variance. To minimise this impact the professional guidance recommends
scenario testing / sensitivity analysis is adopted, which is also advocated in
Whole Plan viability assessments.
2.6.4 The residual method can be presented in different ways, with the land value,
profit or even Council policies set as the ‘residual’ or outcome of the appraisal.
Based on our experience we would advocate fixing the land value and
developer’s profit at pre-agreed levels, and therefore the ‘residual’ (if any) could
be used to meet Council policies. We consider this to be the simplest way of
approaching Whole Plan viability assessments.
2.6.5 As part of the process, it is vital that stakeholders are appropriately engaged, to
help ensure planning policies are set at realistic levels.
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3. RESIDENTIAL – VIABILITY ASSUMPTIONS
3.1 Introduction
3.1.1 This section of the report sets out the assumptions and appraisal inputs used in
the appraisal testing of residential development sites.
3.2 Site Types
3.2.1 DVS have undertaken various area wide studies, involving both ‘real’ site
assessments (i.e. appraising a sample of actual development sites) and
hypothetical sites.
3.2.2 Both methods are considered to be reasonable approaches for the purposes of
a Whole Plan viability assessment.
3.2.3 However, in this case, and having discussed both options through the
Stakeholder Workshop and the subsequent questionnaire, we decided to adopt
hypothetical site testing as this enables the same site to be tested across
different locations, which clearly demonstrates changes in viability across local
housing markets and different value areas.
3.2.4 Having discussed the nature of the hypothetical sites with the Council and the
stakeholders, and having researched the local market dynamics, we have
adopted the following hypothetical development sites:
Residential – Urban Extension
- Number of dwellings: 50, 100 and 400.
- Value areas: Low, Low/medium, Medium and High (as detailed in Table A
below).
- Locations: Doncaster Main Urban Area, 7 Main Towns, and 10 Service
Towns/Villages.
- Please note, as agreed with the Council and Stakeholders not all of the
above variances were tested. However, through a combination of the above
variances we established 28 hypothetical site types to test.
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Table A. Settlement Value Areas
Area/ Site Location
Value Corresponding Settlement(s) Total number of
site types to test
Service Towns/ Villages:
High Auckley-Hayfield Green, Finningley, Bawtry, Tickhill, Sprotbrough,
Barnburgh-Harlington
2
Doncaster Main Urban Area
Low Bentley 2
Doncaster Main Urban Area
Medium Scawsby 3
Main Town Medium Mexborough 3
Main Town Low / Medium
Conisbrough & Denaby 3
Main Towns Low Thorne-Moorends Rossington Adwick-Woodlands
8
Main Towns, Doncaster Main Urban Area &
Service Village
Medium Hatfield-Stainforth & Armthorpe, Edenthorpe & Barnby Dun
3
Service Towns Medium Askern, Skellow & Carcroft 2
Service Town Low Edlington 2
TOTAL 28
Residential – Urban Settlement
- Number of dwellings: 1, 5, 14, 50 and 100.
- Value areas: Low, Medium and High (as detailed in Appendix 3).
- Type: greenfield, brownfield (cleared) and brownfield (occupied).
- Please note, as agreed with the Council and Stakeholders not all of the
above variances were tested. However, through a combination of the above
variances we established 27 hypothetical site types to test.
3.2.5 Please see Appendix 3 for a map of the high, medium and low value areas. Each
development type has been tested in the three value areas, as summarised in Table B
below.
Table B. Development type and viability tests
Development Type 3 x value areas (high, medium & low)
Total number of site types to test
Single dwelling greenfield infill plot H,M,L 3
5 units cleared site H,M,L 3
5 units occupied site H,M,L 3
14 units cleared site H,M,L 3
14 units occupied site H,M,L 3
50 units cleared site H,M,L 3
50 units occupied site H,M,L 3
100 units cleared site H,M,L 3
100 units occupied site H,M,L 3
TOTAL 27
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3.2.6 The above site types are considered to be reflective of the type of sites likely to
come forward during the lifetime of the Local Plan.
3.2.7 However, please note we have not tested larger ‘urban extension' sites (i.e.
larger than 400 dwellings), which may be delivered during the life of the Local
Plan. We understand such sites will be assessed by way of a separate
assessment, and would act as an addendum to this study.
3.3 Gross And Net Developable Areas
3.3.1 For the purposes of this study we have assumed the net developable area of a
site is defined as follows:
Net developable area refers to the total area of land available for development,
not necessarily the total area of a property itself. It does not include open space,
drainage land, regional roads and land used for other public facilities.
In relation to housing sites, net developable area excludes main roads, buffer
zones, structural landscaping, other uses such as local shops, school sites
where required, and general open space and, wherever possible, features of
natural heritage interest. Net developable area includes local access roads,
parking areas, footpaths and local open space such as children’s play areas
and amenity space.
3.3.2 At the Stakeholder Workshop initial gross to net site areas were discussed. It
was agreed that smaller sites will require less of a reduction from gross to net
when compared to larger sites (where there are greater needs for infrastructure,
open space provisions etc. all of which serve to reduce the net developable area
of a site).
3.3.3 At the Workshop, and in the subsequent 3 completed questionnaires, reference
was also made to the gross to net areas taking into account policy asks with
regard to public open space provisions.
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From our conversations with the Council, in respect to the precise requirement
it is understood the Open Space Provision requirement will be site specific and
depend on exact location of site, site size, and green space deficiency/need in
the area. For the purpose of whole plan testing and using hypothetical sites DVS
has had regard to Draft Policy 43: Open Space Provision in New Developments
(see below 3.21 for further details) which requires the following:
All developments 10 units+ will be expected to provide between 7% - 18% of
the site area as open space or provide an equivalent commuted sum in lieu
(18% as open space or amenity space and at least 7% children's play and sport
or by commuted sum). Also management and maintenance will be required. As
the provision of open space is site specific, the appraisals assume the following:
- A commuted sum of 13% of the land value for all schemes providing 50 or
less dwellings
- Schemes providing 51 – 100 dwellings require an on-site provision,
equivalent to 13% of the gross site area.
- Schemes providing 101 or more dwellings require an on-site provision,
equivalent to 18% of the gross site area.
3.3.4 In terms of evidence of actual sites appraised by DVS, we have reviewed a
number of individual viability assessments (33 in total) appraised by DVS in
recent years where we were able to identify the gross and net areas of the site.
The size of the schemes range from 0.71 Ha to 18.68 Ha and show the following
average gross to net site areas:
0.5 – 2Ha 88.49% 2.0 – 5Ha 85.32% > 5 Ha 74.32%
3.3.5 Taking into account the identified evidence, but also making specific allowances
for the Council’s draft open space policy, we have subsequently adopted the
following gross to net site areas:
< 0.5Ha 100% 0.5 – 2Ha 85% 2.0 – 5Ha 80% > 5 Ha 75%
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3.4 Capacity / Density
3.4.1 Capacity is typically measured on the basis of dwellings per net developable
hectare.
3.4.2 On a site by site basis the number of dwellings per net developable hectare will
vary depending on the nature of the scheme, the product being provided and
the location. For the purposes of this study we have therefore looked to adopt a
reasonable average to apply to the hypothetical site types.
3.4.3 By way of evidence, we have reviewed a number of individual viability
assessments (a reduced sample of 24 in total) appraised by DVS in recent
years. Please note, the sample was smaller than the gross to net area
assessment as we limited the sample to schemes providing 25 or more
dwellings. The average across the sample equated to 34.92 dwellings per net
developable Ha.
3.4.4 At the Stakeholder workshop DVS suggested a density range of 35 – 40
dwellings per net Ha. The general consensus at the workshop was that 35
dwellings per net developable Ha was an appropriate average to use in the site
testing. It was noted that the Council’s recent Housing & Economic Land
Availability Assessment evidence base also had a stakeholder group agreed
appropriate density ranging between 30-40 dwellings per net developable Ha.
3.4.5 Of the 3 questionnaires completed, 1 indicated a range of 30 – 35 dwellings per
net developable Ha was appropriate, whereas the other 2 indicated a range of
35 – 40 was reasonable.
3.4.6 Having considered all of the above we have adopted an average capacity
equivalent to 35 dwellings per net developable Ha.
3.4.7 With regards to density, this is expressed as total square metres per net
developable Ha. Again, this will fluctuate depending on the nature of the site
and in particular the type of dwellings that are being constructed (i.e. 3 storey
townhouses will have a different density rate to single storey bungalows).
3.4.8 At the Stakeholder Workshop the general view was that density should fall
within the range of circa 2,750 to 3,350 sq. m per net developable Ha.
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3.4.9 In terms of the 3 questionnaire responses: 1 did not comment on this point, 1
indicated that 3,350 sq. m per net developable Ha appeared “on the high side”,
whilst the other stated that 3,350 sq. m per net developable Ha was “a
reasonable assumption to reflect national housebuilder expectations”.
3.4.10 Of the sample of 24 viability appraisals received by DVS across the general
region, the analysis shows an average equivalent to 2,975 sq. m per net
developable Ha. However, it is noted that there are a couple of anomalous
entries in the sample, which has served to reduce the overall average. In this
regard, it is noted that the median equates to 3,127 sq. m per net developable
Ha.
3.4.11 Having taken all into consideration, we have taken the view that a ‘ceiling’ of
circa 3,350 sq. m per net developable Ha is appropriate for the purposes of this
study. However, in trying to maximize return whilst achieving a balance between
detached, semi-detached, terraces etc. we believe that house builders would
look to achieve as close as possible to this ceiling level, particularly given the
increased use of 2.5 storey house products (i.e. dwellings that provide additional
usable space, typically bedrooms, in the void under the roof). As such have
appraised the sites on this basis.
3.5 Dwelling Mix And Sizes
3.5.1 We have considered a variety of housing types to include traditional detached,
semi-detached and terraced 2 storey housing, 2.5 / 3 storey variations of these
house types, bungalows, muse houses and apartments.
3.5.2 Prior to the market ‘crash’ in 2008 developers were regularly looking to
apartments and 3 storey variations of semi-detached and terraced dwellings as
a way to increase scheme densities and maximise revenues. 3 storey town
houses were particularly popular as a way of maximising the space available to
the family market, without having to increase the plot sizes (enabling builders to
maximize the amount of usable space on a scheme). They typically involved
relatively narrow structures where the layout of the traditional house was re-
imagined (e.g. kitchens placed on 1st floors, bedrooms on ground floors etc.).
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3.5.3 However, since the downturn in the market there has been a general shift in
demand, with more traditional 2 storey products proving significantly more
popular in the market place than the 3 storey variations (which in turn has
resulted in a sharp general fall in the values achieved for the 3 storey house
types). Recognising this, house-builders have largely turned away from 3 storey
products seen at the height of the market between 2004 and 2007. Instead, the
majority of house builders are now delivering ‘tried and tested’ traditional 2
storey products.
3.5.4 That said, there has been a recent increased use of 2.5 storey products (i.e.
extra bedrooms are built into the roof void). The benefit of this option is that an
increased floor space is achieved without having to re-work the layout of the
traditional house i.e. the kitchen and the living room remain at ground floor level
with bedrooms on the upper floors, which generally remains more popular with
purchasers.
3.5.5 For the above reasons, we have not therefore included any 3 storey house
types. Instead, we have assumed there would be a greater focus on traditional
2 storey house types, mixed with some 2.5 storey products described above.
3.5.6 As for apartments, these were equally popular with house builders prior to 2008,
with demand primarily being driven by buy-to-let investors, who were keen to
take advantage of favourable buy-to-let mortgage products and strong capital
growth in the residential market. The result was an increase in apartments
outside of the traditional city / town centre locations, with apartments becoming
a regular fixture in suburban / edge of settlement housing developments.
However, in the wake of the crash the buy-to-let market suffered a sharp
decline. As such demand for apartments fell, which in turn meant values
decreased significantly. In many cases developers were left with apartments
that they were unable to sell unless heavily discounted. In light of this recent
market experience, in the current climate house builders are still taking a more
cautious approach to the apartment sector.
3.5.7 For the majority of the sites across the Doncaster area, given their locations it
is therefore considered unlikely that apartments would make up a significant
proportion of the accommodation provided (if any). For the purposes of this
study we have not subsequently looked to factor in any apartments into the
appraisals.
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3.5.8 In summary, for all of our appraisals we have looked to include a mix of 2/2.5
storey traditional detached, semi-detached and terraced housing, as these are
the types of dwellings we anticipate housebuilders will continue to promote
going forward.
3.5.9 In terms of an appropriate average dwelling size, the sample of 24 appraisals
used above to determine capacity / density, indicates an average house size of
85 sq. m (or a median of 88 sq. m).
3.5.10 However, the purposes of this study, we have adopted a slightly higher average
house size of 92.90 sq. m (or 1,000 sq. ft.), which allows for the use of more 2.5
storey products, which would increase the overall average size of the dwellings.
3.5.11 This slightly higher figure has also been chosen to ensure the dwellings built
meet minimum requirements, as detailed in the Department for Communities &
Local Government’s (“DCLG”) “Technical housing standards – nationally
described space standard” March 2015, which can be summarised below in
Table 1 – Minimum gross internal floor areas and storage (sq. m)
Number of beds
Number of bed spaces (persons)
1 storey
2 storey
3 storey
1b 1p 39
2p 50 58
2b 3p 61 70
4p 70 79
3b 4p 74 84 90
5p 86 93 99
6p 95 102 108
4b 5p 90 97 103
6p 99 106 112
7p 108 115 121
8p 117 124 130
5b 6p 103 110 116
7p 112 119 125
8p 121 128 134
6b 7p 116 123 129
8p 125 132 138
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3.5.12 Having considered the above minimum space standards an average of 92.90
sq. m (or 1,000 sq. ft.) was considered appropriate in undertaking this study.
3.6 Specification
3.6.1 In the market place, there will be some variation in the specification of the final
dwellings; and in the degree of aspiration for high quality design. For the
purposes of a Whole Plan viability assessment we recommend an assumption
that the sites to be developed reflect an average design specification for that
particular location (therefore in high value areas a better specification is allowed
for than in lower value areas).
3.6.2 It is also recognised that draft Policy 67 Housing design Standards seeks to
ensure all new dwellings are built to Part M4 (2) of the building regulations
(which relates to the accessibility and adaptability of dwellings).
3.7 Affordable Rented Assumptions
3.7.1 For the purposes of this assessment we have assumed any affordable housing
provision is to be provided ‘on-site’.
3.7.2 The Home and Communities Agency (“HCA”) publication “Rent Standard
Guidance” April 2015 defines Affordable Rent as follows:
“Homes let on Affordable Rent terms fall within the definition of social housing
but are exempt from the full requirements of rent restructuring” Pg. 12
Paragraph 4.2
“Homes let on Affordable Rent terms should be made available at a rent level
of up to 80% of gross market rents (inclusive of service charges where
applicable)”. Pg. 12 Paragraph 4.4
“the maximum annual rent increase on an Affordable Rent property will be the
Consumer Price Index (CPI) + 1.0%. CPI will be taken as at September of the
previous year. This figure is a ceiling, not a target. It is open to providers to
increase rents by a lower figure where circumstances justify doing so. On each
occasion that an Affordable Rent tenancy is issued for a property -whether it is
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let to a new tenant or an existing tenancy is re-issued, providers are required to
reset the rent based on a new valuation, to ensure that it remains at no more
than 80% of the relevant market rent. This requirement overrides the CPI + 1.0%
limit. Pg. 13 and 14 Para 4.13 & 4.24
3.7.3 In short, Affordable Rented units are therefore calculated in relation to the
private sector, with a maximum charge of 80% of the Market Rent. This is
combined with an annual increase cap of CPI + 1%, albeit whenever a new
tenancy is entered into the affordable rent reverts to a maximum of 80% of the
Market Rent, overriding the annual increase.
3.7.4 In terms of identifying appropriate transfer values for Affordable Rented units
the following methodologies can be adopted:
(i) Rent and yield – arrive at a transfer value by identifying the net rental
income to the Registered Provider and capitalising this using an
appropriate yield.
(ii) Comparable – transfer values submitted by applicants as part of their
own viability appraisals.
3.7.5 For method (i) we assume that a Registered Provider would look to charge the
maximum allowed, being 80% of the Market Rent. We also assume that any
service charge would only cover costs incurred (i.e. no profit is made from the
service charge). We would not therefore include service charges in our
assessment.
3.7.6 We have then assessed Market Rents across Doncaster. Once an average
Market Rent was identified for each housing type in each location we calculated
80% of this figure (reflecting the maximum chargeable rent outlined above,
being 80% of Market Rent).
3.7.7 From this we have looked to ‘net’ down the gross Affordable Rent by making
allowances for management, bad debts, voids and repairs / maintenance. We
consider fixed costs of £500 per annum for management and £600 per annum
for general repairs / maintenance to be reasonable. We have also made an
allowance of 3% on the gross Affordable Rent to reflect bad / debts and voids.
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3.7.8 We have then applied a capitalisation rate (yield) of circa 6% to arrive at the
transfer value (rounded up or down to nearest £5k).
3.7.9 We have looked at a sample of 20 modern houses across Doncaster, which are
either currently available to let or have recently been let, as follows:
Table 2 – Sample of rented modern houses & affordable rent calculation
Street Locality Type Bed
Market Rent p.c.m
Afford Rent p.a.
Transfer Value
Langer St DN4 Terr 2 440 4,224 49,955
Ansult Court DN5 Terr 2 475 4,560 55,387
Kirkby Avenue DN5 Terr 2 495 4,752 58,491
Field View DN12 Terr 2 495 4,752 58,491
Hams Road DN3 Terr 2 575 5,520 70,907
Twigg Crescent DN3 Terr 3 575 5,520 70,907
Walstow Crescent DN3 Terr 3 595 5,712 74,011
Branchcroft Drive DN4 Terr 3 625 6,000 78,667
Cavalier Court DN4 Terr 3 645 6,192 81,771
Harris Rd DN3 Terr 3 650 6,240 82,547
Ellers Road DN4 Terr 3 695 6,672 89,531
Harden Mews DN3 Terr 3 700 6,720 90,307
Huxterwell Drive DN4 Semi 2 525 5,040 63,147
Aidans Close DN2 Semi 2 550 5,280 67,027
Sunningdale Drive DN12 Semi 3 520 4,992 62,371
Wood Court DN3 Semi 3 725 6,960 94,187
Honeysuckle Close DN4 Semi 3 750 7,200 98,067
Longfield Drive DN3 Det 3 675 6,480 86,427
Wellingley Rd DN4 Det 4 850 8,160 113,587
Apple Tree Way DN4 Det 4 1,100 10,560 152,387
3.7.10 Having identified a broad transfer value for each house we have then looked to
identify this as a ‘rate per sq. m’. To do this, we have divided the estimated
transfer value by the average house value used in this study (i.e. an average
house size of 92.90 sq. m). This produces a transfer value range of circa £535
to £1,640 per sq. m, with an average of £860 per sq. m. This average equates
to circa 49% of the medium sales value rate of £1,750 per sq. m.
3.7.11 In terms of method (ii), typically we see affordable rented units in appraisals
received from developers / house builders roughly equating to circa 50% – 55%
of market value.
33
3.7.12 At the Stakeholder workshop the general discussion was around the current
uncertainty in the affordable housing sector, owing to changes in funding,
proposed introduction of Starter Homes etc. The general consensus was to err
on the side of caution when identifying average transfer values in the appraisals.
3.7.13 Having considered all the above, for the purposes of the appraisal testing we
have adopted average Affordable Rent transfer values at 45% of the equivalent
Market Value dwelling.
3.8 Intermediate / Shared Ownership Assumptions
3.8.1 As part of the Government’s Help to Buy initiative, the Government defines
Intermediate/Shared Ownership as being a scheme provided through housing
associations whereby the purchaser buys a share of the home (between 25% –
75% of the home’s value) and pays a rent on the remaining share.
3.8.2 Typically we see intermediate/shared ownership units in appraisals received
from developers/house builders equating to circa 67.5%/70% of market value.
3.8.3 Again, the general view at the Stakeholder workshop was for a cautious
approach to be adopted given current uncertainties in the affordable housing
sector.
3.8.4 Having considered all the above, for the purposes of the appraisal testing we
have adopted average Intermediate / Shared Ownership transfer values at
67.5% of the equivalent Market Value dwelling.
3.9 Starter Homes
3.9.1 The Housing and Planning Act 2016 imposes a requirement for Starter Homes,
stating under Chapter 1, Section 4 of the legislation, “An English planning
authority must carry out its relevant planning functions with a view to promoting
the supply of starter homes in England”.
3.9.2 A Starter Home is defined under Section 2 as being:
(a) a new dwelling,
(b) available for purchase by qualifying first-time buyers only,
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(c) to be sold at a discount of at least 20% of the market value,
(d) to be sold for less than the price cap, and
(e) subject to any restrictions on sale or letting specified in regulations made
by the Secretary of State
3.9.3 However, at this stage there is no regulation confirming how Starter Homes are
to be introduced into the planning system (e.g. whether this will replace existing
affordable housing, be part of the mix of affordable housing, or be in addition to
traditional affordable units).
3.9.4 For the purposes of this assessment we have incorporated Starter Homes into
a separate scenario test, on the assumption that it would replace traditional
affordable housing. This is seen as a useful way of assessing how Starter
Homes will impact on the overall viability (i.e. positively or negatively) and
enable a direct comparison with the equivalent scenarios that incorporate
traditional affordable housing.
3.10 Market Value Sales Revenue
3.10.1 Please see Appendix 1 for a detailed review of the local housing market.
3.10.2 It is important to stress that a series of factors will influence values and that,
although development schemes do have similarities, every site is unique.
Consequently, whilst market conditions in general will broadly reflect national
economic circumstances and local supply / demand factors, within an area there
will be particular localities and site-specific factors that generate different values
and costs. The range of sites tested in this study allows assessment of viability
across varying localities for this reason.
3.10.3 For the purposes of our appraisal testing we have subsequently adopted the
following average sales values:
Area Average Sales value (£ per sq. m)
Low value area £1,500 Medium value area £1,750 - £2,000 High value area Over £2,250
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3.11 ‘Basic’ Build Costs
3.11.1 A frequently used source of data regarding build costs is the Building Cost
Information Service (BCIS) of the RICS. This is a national database, which, for
different locations across the country and through sample analysis, seeks to
provide indicative costs for constructing a dwelling, to include the foundation
works. This is expressed as a rate (£) per square metre of the proposed dwelling
and includes scheme preliminaries, but excludes any external costs associated
with the project (i.e. fencing, gardens, site infrastructure such as services and
road ways, drains, street lights etc.).
3.11.2 For the following reasons, we are of the view that the BCIS has limitations as
evidence of residential construction prices, particularly when assessing larger
schemes (40/50 dwellings or more):
- In Jan 2016 DVS undertook an analysis of the BCIS data recorded since
Jan 2011. Of the 106 housing schemes submitted during this period, 68%
related to schemes comprising 20 or less units. Only 7.55% of the data
related to schemes over 50 homes.
- It is also stressed that volume house-builders (who would most likely
develop large schemes) do not contribute to the data. It is generally
accepted that volume house-builders are able to construct houses at a
cheaper rate (owing to their ability to bulk-buy materials, offer more regular
work and negotiate cheaper contracts with sub-contractors etc.). As the
cheaper volume house-builder costs are not reflected by the BCIS, the data
can be regarded as being inherently high, at least when trying to determine
the construction costs for a large scheme.
- BCIS tracks tender prices, not actual costs. The reality is that developers
will typically look to negotiate down tenders. In this regard the BCIS figures
are inherently high.
3.11.3 The BCIS data should, therefore, be considered in the context of the above.
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3.11.4 In July 2016 BCIS data for general housing costs, rebased to South Yorkshire,
shows the following rates:
- A lower quartile figure of £798 per sq. m
- Median figure of £900 per sq. m
- Upper quartile of £1,017 per sq. m.
3.11.5 In terms of other data sources, we have also considered ‘live’ tender information
from the Homes and Communities Agency (“HCA”). The HCA has a tender
framework called the Delivery Partner Panel 2 (“DPP2”), which was created
primarily to speed up the disposal of surplus public sector land to enable
residential construction to proceed. The panel includes mainly national and
regional house builders, and therefore accesses information not available to the
BCIS. As part of the tender process panel members are invited to submit
appraisals on individual sites, with the intention being that by ‘bidding’ against
one another the land returns will be maximised. This is therefore considered to
be a strong source of information as it gives a clear indication of what house
builders are willing / able to build houses for in a competitive situation.
3.11.6 In Jan 2016 the HCA provided average figures for 81 developments (with an
average 231 residences) the median build cost ascertained from tender bids is
£831 per sq. m. As this data is derived primarily from volume house builders it
is considered to be appropriate when assessing larger schemes.
3.11.7 However, the figure of £831 per sq. m has been attached a “weighting” of 100,
which is in line with the approach the BCIS takes to show regional variances.
Different areas are given different weightings by the BCIS, for example I note
South Yorkshire currently has a weighting of 93. Whilst it is unclear on what
basis these weightings are assessed, in this instance we consider it reasonable
to apply the current weighting to the DPP2 data, to help ensure the data
provides a more accurate assessment of the local area. Applying a weighting of
£93 to £831 per sq. m would decrease the build costs to circa £773 per sq. m.
3.11.8 In terms of drawing a conclusion from the above information we would highlight
two keys factors which we consider to be significant:
(i) For the larger schemes (say 25 – 50 units plus) it is assumed these
would most likely attract volume house-builders.
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(ii) Volume house builders are able to deliver schemes at reduced costs
when compared to smaller local / regional builders.
3.11.9 At the Stakeholder workshop the general view was that BCIS remains a valid
source of data on build costs. Reference was made to other viability studies
prepared on behalf of other local authorities, which had adopted the BCIS and
ultimately received approval from the Planning Inspectorate. However, it was
agreed that the data did have its limitations. The 3 completed questionnaires
also advocated the use of BCIS.
3.11.10 We also note other area wide studies have tended to favour the use of the BCIS.
However, there are example of other studies which also appear to conclude that
using the BCIS median figure is not appropriate for an area wide viability
assessment. For example, the Calderdale Council Local Plan and CIL Viability
Evidence undertaken by GVA, dated Oct 2015, concluded that construction
costs based on the BCIS lower quartile figures was appropriate for the purposes
of the study.
3.11.11 In the context of the above, we have subsequently looked to use the BCIS in
determining the ‘basic’ build costs of each dwelling.
3.11.12 However, in light of the DPP2 information, which demonstrates there is a saving
on build costs for larger developments, we have looked to run 2 scenarios when
testing each hypothetical site type; the first being based on the BCIS lower
quartile figure of £798 per sq. m, the second being based on the median of
£900 per sq. m. This approach is therefore designed to capture, within the
testing process, the differential identified in the evidence to ensure the results
are as accurate as possible.
3.12 Externals / Infrastructure
3.12.1 In addition to the per sq. m build costs described above, allowance needs to be
made for a range of infrastructure costs – roads, drainage, and services within
the site; parking, footpaths, landscaping and other external costs; as well as off-
site costs for drainage (including SUDs) and other services.
38
3.12.2 Many of these items will depend upon individual site circumstances and can
only be estimated following a detailed assessment of each site. This is not
practical within the scope of this study and therefore, based upon the
experience of our Quantity Surveyors, a general allowance in relation to the
build costs should be made.
3.12.3 Based on this experience, the standard approach to determining suitable
infrastructure / external works as part of a viability assessment, and one that is
commonly used in the industry, is to apply a percentage allowance to the basic
build cost. Our experience is that, as a percentage of basic build cost, this tends
to be in the region of 15%, albeit it is acknowledged that this will fluctuate
depending on the nature of the site.
3.12.4 At the Stakeholder workshop the general view was that a 15% allowance for
external costs was a reasonable assumption for the purposes of Whole Plan
viability study. Further to this, 2 of the completed questionnaires also advocated
the use of a 15% allowance. The other completed questionnaire did not indicate
an appropriate percentage allowance, although the stakeholder did state that it
was appropriate to adopt a single percentage allowance across all site types.
3.12.5 We have also reviewed a number of area wide viability studies from the wider
region. Please note a number of the area wide studies date back to 2013. This
reflects the studies that were available in the public domain at the time of writing
this report. This ‘lag’ is likely to be because of the time it takes, for example, for
a CIL viability study to be undertaken and a CIL charge being implemented,
such as the GVA Leeds viability CIL study is dated January 2013, however CIL
was not introduced within Leeds until April 2015. However, some of the key
principles are still considered to be relevant, despite dating back to 2013.
3.12.6 Furthermore, please note we have not referenced all of the studies identified
when considering external costs. This is because in some of the studies we
were unable to identify what had been allowed for in the external costs. For
example, the GVA Leeds viability study adopted an ‘all in’ build cost on a rate
per sq. m, which included the construction cost of the houses, preliminaries and
external costs. We were therefore unable to extrapolate what had been
specifically allowed for in terms of external costs.
39
3.12.7 Notwithstanding the comments above, we have identified the following external
costs as shown within area wide studies:
Gedling Borough Council Local Plan Viability Assessment – undertaken
by NCS, dated Mar 2016. Externals / infrastructure inherently included
within adopted build cost, therefore a percentage allowance cannot be
provided.
Bradford City Council CIL Viability Evidence – undertaken by DTZ,
dated June 2015. Externals / infrastructure 15% of basic build cost.
Calderdale Council Local Plan and CIL Viability Evidence – undertaken
by GVA, dated Oct 2015. Externals / infrastructure 15% of basic build
cost.
Mansfield District Council Local Plan: Viability Assessment –
undertaken by DSP Planning and Development Viability Consultants,
dated Nov 2015. Externals / infrastructure 5% - 20% of basic build cost
(depending on the nature of the site type).
Wakefield Metropolitan District Council CIL Viability Study – undertaken
by DTZ, dated Feb 2014. Externals / infrastructure 15% of basic build
cost.
Sheffield City Council CIL Viability Study – undertaken by BNP Paribas,
dated Feb 2014. Externals / infrastructure 15% of basic build cost.
Leicester, Leicestershire & Rutland CIL Viability Study – undertaken by
HDH Planning, dated January 2013. Externals / infrastructure 10% of
basic build cost for the smallest sites, increasing to 20% for the larger
greenfield schemes.
North York Moors National Park Authority CIL Economic Viability
Assessment – undertaken by Peter Brett Associates, dated November
2013. Externals / infrastructure 10% of basic build cost.
40
North East Lincolnshire Local Plan and CIL Viability Assessment –
undertaken by GVA, dated September 2013. Externals / infrastructure
20% of basic build cost.
Rotherham Metropolitan Borough Council Community Infrastructure
Levy Study – undertaken by Peter Brett Associates, dated July 2013.
Externals / infrastructure 15% of basic build cost.
Harrogate CIL Economic Viability Assessment, dated March 2013.
Externals / infrastructure 10% of basic build cost.
Stafford Borough Council Report on Viability and Deliverability, dated
July 2013. Externals / infrastructure 10% of basic build cost.
Selby District Council Community Infrastructure Levy Study –
undertaken by Peter Brett Associates, dated Sept 2013. Externals /
infrastructure 10% of basic build cost.
3.12.8 The external costs included across the 13 area wide studies show an average
of 12.5% to circa 14.6%.
3.12.9 Taking all into consideration we have taken the view that a single figure of 15%
of the basic build cost is considered fair and reasonable.
3.13 Contingency
3.13.1 In addition to basic build costs and external / infrastructure works described
above, it is common practice to include a contingency allowance in the event
that any unforeseen costs arise once the development proceeds. We consider
this to be fair and reasonable for the purposes of a viability appraisal.
3.13.2 Our experience is that, as a percentage of basic build cost and externals /
infrastructure, this tends to range from circa 2% to 5%, depending on the nature
of the site.
3.13.3 At the Stakeholder workshop the general view was that 3% - 5% was
appropriate. 2 of the completed questionnaires suggested 3% for greenfield and
5% for brownfield, whereas the other suggested 3.5% for greenfield and 5% for
brownfield.
41
3.13.4 As further evidence we have again looked at viability appraisals received from
applicants, received by DVS. We have again used the same sample of 33
appraisals (used above for the assessment of gross and net areas), which have
been received during the last 2 years for mixed housing sites, covering a wide
range of sites (from 28 to 600 dwellings). Please note as these cases contain
sensitive commercial information we have not provided the full address details
or the parties involved. The contingency costs identified range from 0% to
7.15%. The average across the sample for greenfield sites equates to 2.96%
and brownfield sites equates to 3.07%. This suggests that in practice there is
little differential between greenfield and brownfield contingency allowances.
3.13.5 In addition, we have also considered the DPP2 evidence referenced above (in
the consideration of basic build costs). For 81 projects in 2015, being a mix of
brownfield and greenfield sites, the mean contingency equated to 2.7%.
3.13.6 As per external costs, we have also reviewed a number of area wide viability
studies from the wider region. Please note we have not referenced all of the
studies identified when considering contingency. This is because in some of the
studies we were unable to identify what had been allowed for in the contingency.
3.13.7 Notwithstanding the comments above, we have identified the following
contingency as shown within area wide studies:
Gedling Borough Council Local Plan Viability Assessment – undertaken
by NCS, dated Mar 2016. Contingency 5% of basic build cost.
Bradford City Council CIL Viability Evidence – undertaken by DTZ,
dated June 2015. Contingency 5% of basic build cost.
Calderdale Council Local Plan and CIL Viability Evidence – undertaken
by GVA, dated Oct 2015. Contingency 3% of basic build costs for
greenfield sites, increasing to 5% for brownfield sites.
Mansfield District Council Local Plan: Viability Assessment –
undertaken by DSP Planning and Development Viability Consultants,
dated Nov 2015. Contingency 5% of basic build cost.
42
Wakefield Metropolitan District Council CIL Viability Study – undertaken
by DTZ, dated Feb 2014. Contingency 5% of basic build cost.
Sheffield City Council CIL Viability Study – undertaken by BNP Paribas,
dated Feb 2014. Contingency 5% of basic build cost.
Leicester, Leicestershire & Rutland CIL Viability Study – undertaken by
HDH Planning, dated January 2013. Contingency 2.5% for the
greenfield sites, increasing to 5% for the larger greenfield schemes.
North York Moors National Park Authority CIL Economic Viability
Assessment – undertaken by Peter Brett Associates, dated November
2013. Contingency 5% of basic build cost.
North East Lincolnshire Local Plan and CIL Viability Assessment –
undertaken by GVA, dated September 2013. Contingency 3% of basic
build cost.
Rotherham Metropolitan Borough Council Community Infrastructure
Levy Study – undertaken by Peter Brett Associates, dated July 2013.
Contingency 5% of basic build cost.
Harrogate CIL Economic Viability Assessment – undertaken by Tym &
Partners (Part of Peter Brett Associates), dated March 2013.
Contingency 5% of basic build cost.
Stafford Borough Council Report on Viability and Deliverability –
undertaken by Levvel Ltd, dated July 2013. No contingency has been
included.
Selby District Council Community Infrastructure Levy Study –
undertaken by Peter Brett Associates, dated Sept 2013. Contingency
5% of basic build costs.
43
3.13.8 9 of the 13 studies identified show a single contingency allowance of 5%.
However, it should be noted that 4 of these studies adopt external /
infrastructure costs at only 10% (therefore below the 15% concluded above for
the purposes of this study). This may explain why the contingency has been set
at 5%, which in our experience is towards the top end of the range.
3.13.9 Having assessed all of the available evidence we have taken the view that a
single figure of 3% of the basic build cost is considered fair and reasonable for
the purposes of this area wide study.
3.14 Abnormal Development Costs
3.14.1 Abnormal costs relate to issues such as decontamination, adverse geo
technical conditions, off-site highway works, demolition of existing buildings etc.
(i.e. works which would not be associated with a ‘standard’ scheme). Abnormal
costs will vary significantly depending on the nature of the scheme, ranging from
zero to potentially several million pounds.
3.14.2 Often abnormal costs are not revealed until a full scheme design is completed
and the relevant due diligence undertaken. It is therefore impossible to provide
a robust assessment of the likely abnormal costs that could be associated with
the sites. For this reason, in undertaking district wide viability studies for some
other Councils we have adopted a zero (nil) cost for abnormal works.
3.14.3 However, based on our experience we are of the view that it is appropriate to
include a ‘spot allowance’ for abnormal costs (as it is felt that most sites within
the area have in the past and are likely in the future to attract additional
abnormal costs).
3.14.4 Our approach is to consider abnormal costs on a ‘rate per Ha’ basis.
3.14.5 In our appraisals we have subsequently adopted a figure of £100,000 per gross
Ha for the greenfield sites, £200,000 per gross Ha for cleared brownfield sites
and £300,000 per Ha for occupied brownfield sites. Whilst arbitrary, this at least
acknowledges that most sites tend to attract some form of abnormal costs.
44
3.15 Professional Fees
3.15.1 Our experience is that circa 6% of build costs is appropriate (expressed as a
percentage of the basic build costs plus the external works).
3.15.2 At the Stakeholder workshop a range of 5% - 8% was discussed. 2 of the
completed questionnaires suggested 8%, whilst the other suggested a range of
8% to 10% depending on the nature of the site type.
3.15.3 As further evidence we have again looked at viability appraisals received from
applicants, received by DVS. We have again used the same sample of 33
appraisals (used above for the assessment of gross and net areas), which have
been received during the last 2 years for mixed housing sites, covering a wide
range of sites (from 28 to 600 dwellings). Please note as these cases contain
sensitive commercial information we have not provided the full address details
or the parties involved. The professional fees identified range from 0% to 13%.
The average across the sample equates to 5.77%.
3.15.4 In addition, we have also considered the DPP2 evidence referenced above. For
81 projects in 2015, the mean professional fees equated to 5.10%.
3.15.5 As per external costs and contingency, we have also reviewed a number of area
wide viability studies from the wider region. We have identified the following
professional fees as shown within area wide studies (please note a couple of
studies are not included in this sample, as they did not explicitly state what
allowance had been made for professional costs):
Gedling Borough Council Local Plan Viability Assessment – undertaken
by NCS, dated Mar 2016. Professional fee 8% of build cost.
Bradford City Council CIL Viability Evidence – undertaken by DTZ,
dated June 2015. Professional fee 6% of build cost.
Calderdale Council Local Plan and CIL Viability Evidence – undertaken
by GVA, dated Oct 2015. Professional fee 5% of basic build cost for
sites larger than 50 dwellings, 8% for sub 50 dwellings.
45
Mansfield District Council Local Plan: Viability Assessment –
undertaken by DSP Planning and Development Viability Consultants,
dated Nov 2015. Professional fee 10% of build cost.
Wakefield Metropolitan District Council CIL Viability Study – undertaken
by DTZ, dated Feb 2014. Professional fee 6% of build cost.
Sheffield City Council CIL Viability Study – undertaken by BNP Paribas,
dated Feb 2014. Professional fee 10% of build cost.
Leicester, Leicestershire & Rutland CIL Viability Study – undertaken by
HDH Planning, dated January 2013. Professional fee 10% of build cost.
North York Moors National Park Authority CIL Economic Viability
Assessment – undertaken by Peter Brett Associates, dated November
2013. Professional fee 10% of build cost.
North East Lincolnshire Local Plan and CIL Assessment – undertaken
by GVA, dated September 2013. Professional fee 8% of build cost.
Harrogate CIL Economic Viability Assessment – undertaken by Tym &
Partners (Part of Peter Brett Associates), dated March 2013.
Professional fee 10% of build cost.
Selby District Council CIL Study – undertaken by Peter Brett Associates,
dated Sept 2013. Professional fee 10% of build cost.
3.15.6 6 out of the 11 studies therefore include professional fees of 10%. Again,
though, a number of these studies showed what we considered to be extremely
low external costs (at 10% of basic build costs, compared with our figure of 15%)
and therefore it was unclear whether some of the costs that we would regard as
external works were actually being factored within the ‘professional fees’ section
of the appraisal.
3.15.7 On balance, and given our experience in the market place, we have concluded
that for schemes that are most likely to attract a volume house builder we
consider 6% of the basic build / external cost to be appropriate, due to the limited
46
requirement for ‘original’ thought in the design process. For smaller schemes
(which we have assumed as being sub 20 dwellings) that would attract say local
builders we would increase this figure to 8%, principally to reflect the added
professional input required at the design stage.
3.16 Marketing
3.16.1 Our experience is that circa 3% of sales revenue is appropriate.
3.16.2 At the Stakeholder workshop the general consensus was that 3% was
appropriate, albeit excluding legal fees. All 3 of the completed questionnaires
agreed with 3%, but on the basis that legal fees would be allowed for separately
within the appraisal.
3.16.3 In addition, we have also considered the DPP2 evidence referenced above. For
81 projects in 2015, the mean marketing equated to 3.5% (inclusive of legal
fees).
3.16.4 As per external costs and contingency, we have also reviewed a number of area
wide viability studies from the wider region. We have identified the following
marketing and legal fees as shown within area wide studies (please note a
couple of studies are not included in this sample, as they did not explicitly state
what allowance had been made for professional costs):
Gedling Borough Council Local Plan Viability Assessment – undertaken
by NCS, dated Mar 2016. Marketing (including legal fees) 2.5% of sales.
Bradford City Council CIL Viability Evidence – undertaken by DTZ,
dated June 2015. Marketing (including legal fees) 3.5% of sales.
Calderdale Council Local Plan and CIL Viability Evidence – undertaken
by GVA, dated Oct 2015. Marketing (excluding legal fees) 3% of sales.
Mansfield District Council Local Plan: Viability Assessment –
undertaken by DSP Planning and Development Viability Consultants,
dated Nov 2015. Marketing (excluding legal fees) 3% of sales.
47
Wakefield Metropolitan District Council CIL Viability Study – undertaken
by DTZ, dated Feb 2014. Marketing (including legal fees) 3.5% of sales.
Leicester, Leicestershire & Rutland CIL Viability Study – undertaken by
HDH Planning, dated January 2013. Marketing (including legal fees)
2.5% of sales.
North York Moors National Park Authority CIL Economic Viability
Assessment – undertaken by Peter Brett Associates, dated November
2013. Marketing (including legal fees) 3% of sales.
North East Lincolnshire Local Plan and CIL Viability Assessment –
undertaken by GVA, dated September 2013. Marketing (including legal
fees) 3% of sales.
Harrogate CIL Economic Viability Assessment – undertaken by Tym &
Partners (Part of Peter Brett Associates), dated March 2013. Marketing
(including legal fees) 3% of sales.
Selby District Council Community Infrastructure Levy Study –
undertaken by Peter Brett Associates, dated Sept 2013. Marketing
(including legal fees) 3% of sales.
3.16.5 2 out of the 10 studies therefore include marketing fee of 3% of sales values
(excluding legal costs), whilst 4 of the 10 show marketing fees of 3% inclusive
of legal costs.
3.16.6 On balance, and given our experience in the market place, we have concluded
that 3% of sales value is appropriate, plus an additional allowance for legal costs
(which we have set at £500 per dwelling, which is considered to be, if anything,
on the generous side based on individual viability appraisals my office receives
from applicants).
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3.17 Developer’s Profit
3.17.1 When considering profit margins for the purposes of a Whole Plan viability
assessment we have looked to apply what is considered to be the ‘minimum’
return a developer would require to develop each site.
3.17.2 From our experience, we consider the two tiered approach advocated by the
HCA to be appropriate. This involves applying a profit level to the Market Value
homes (normally 15 – 20% of revenue) and a lower contractor’s margin (5 –
10% on cost) to the affordable dwellings. When the two are factored together
this gives an overall ‘blended’ profit level.
3.17.3 At the Stakeholder workshop views were expressed that for the market value
units a rate of 17.5% of sales revenue was appropriate. Equally, others
suggested a figure of 20% of sales revenue. 1 of the completed questionnaires
supported a rate of 17.5% of sales revenue on market value dwellings, whilst
the other 2 suggested a rate of 20% for the market value dwellings. 2 of the
completed questionnaires also supported a reduced rate of 8% to 10% for the
affordable dwellings.
3.17.4 The DPP2 evidence, for 81 projects in 2015, the mean developer’s profit
equates to 19% on GDV for the open market dwellings and 8.1% on cost for the
affordable dwellings.
3.17.5 As further evidence we have again looked at viability appraisals received from
applicants, received by DVS. However, of the sample of 33 appraisals
referenced above, 5 did not ‘fix’ the profit margin in the appraisal (and showed
negative profit margins). In assessing profit the sample is therefore reduced to
28 appraisals. Of this reduced sample, 10 show a minimum developer’s profit
of 17.5% (or lower), 3 show a return of 17.5% to 18.5%, and the remaining 15
show a minimum profit of 20% (or higher). The average profit across the sample
equates to 18.77% (for market value dwellings).
3.17.6 We have also reviewed a number of area wide viability studies from the wider
region. We have identified the following profit margins as shown within area
wide studies (please note a couple of studies are not included in this sample,
as they did not explicitly state what allowance had been made for professional
costs):
49
Gedling Borough Council Local Plan Viability Assessment – undertaken
by NCS, dated Mar 2016. 15% to 20% return for market value dwellings,
6% to 10% for affordable units.
Bradford City Council CIL Viability Evidence – undertaken by DTZ,
dated June 2015. 20% return for market value dwellings, 6% for
affordable units.
Calderdale Council Local Plan and CIL Viability Evidence – undertaken
by GVA, dated Oct 2015. 18% return for market value dwellings.
Mansfield District Council Local Plan: Viability Assessment –
undertaken by DSP Planning and Development Viability Consultants,
dated Nov 2015. 20% return for market value dwellings, 6% for
affordable units.
Wakefield Metropolitan District Council CIL Viability Study – undertaken
by DTZ, dated Feb 2014. 20% return for market value dwellings, 6% for
affordable units.
Leicester, Leicestershire & Rutland CIL Viability Study – undertaken by
HDH Planning, dated January 2013. 20% return when applied to costs
not revenue, which typically equates to circa 17.5% to 18% on revenue.
North York Moors National Park Authority CIL Economic Viability
Assessment – undertaken by Peter Brett Associates, dated November
2013. 20% return when applied to costs not revenue, which typically
equates to circa 17.5% to 18% on revenue.
North East Lincolnshire Local Plan and CIL Viability Assessment –
undertaken by GVA, dated September 2013. 25% return when applied
to costs not revenue, which typically equates to circa 22% to 23% on
revenue.
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Harrogate CIL Economic Viability Assessment – undertaken by Tym &
Partners (Part of Peter Brett Associates), dated March 2013. 20% return
when applied to costs not revenue, which typically equates to circa
17.5% to 18% on revenue.
3.17.7 Based on the evidence above there is clearly an element of ‘flex’ in profit levels
depending on the nature of each particular scheme. The data suggests that a
general range of 15% – 20% on GDV for market value houses is fair and
reasonable at the current time, with the higher end of the range tending to be
applied to larger schemes in lower value areas (and perhaps with higher
associated abnormal / infrastructure costs). For affordable housing a profit
margin of 6% – 10% of cost appears to be broadly reasonable.
3.17.8 For clarity, when undertaking individual viability assessments it is therefore
necessary to assess the appropriate level of profit within the context of the
above parameters. Each site should be taken on its individual merits before a
conclusion is reached on a suitable level of profit. We do not therefore consider
a fixed figure to be appropriate when undertaking individual viability appraisals.
3.17.9 However, for the purposes of this study we consider a developer’s profit
equivalent to 18.5% of revenue to be appropriate, reducing to 8% on cost for
the affordable units. However, please note for the smallest site types (sub 10
dwellings) we have reduced the profit margin on market value dwellings to 15%
on revenue (please note affordable units does apply to residential schemes
under 10 dwellings).
3.18 Finance
3.18.1 It has been assumed throughout this study that VAT either does not arise or that
its effects can be ignored.
3.18.2 There are various approaches that can be taken to assessing finances,
including more complicated methods such as assessing the “Internal Rate of
Return” or an assessment of the “Return on Capital Employed”. However,
having discussed this at the stakeholder workshops we considered the general
consensus to be that area wide studies should adopt a relatively simple
approach to assessing finances, where interest rates (and credit rates) at
51
perceived market levels are inputted into an industry approved toolkit (in this
case the HCA DAT).
3.18.3 Our experience of other areas in the North of England (including specifically the
North East of England) suggests that finance costs have dropped slightly in the
last 18 – 24 months, and that a range of 5.5% – 6.5% is now more common
place. The DPP2 evidence referenced above actually shows an average
interest rates of 3.7%.
3.18.4 In this regard, we consider a debit rate at 6% to be reasonable in the current
climate (albeit it is stressed this is likely to change if Bank of England interests
rates increase significantly). However, for small schemes (sub 10 dwellings) we
have increased this rate to 7%.
3.18.5 We would also advocate the use of a credit rate of 3% (which tends to be
relevant to larger, multi phased developments completed over a number of
years). Again, this is considered to be in line with schemes we are appraising
across the region and also guidance provided by the Homes and Communities
Agency (“HCA”).
3.19 Threshold Land Value (“TLV”)
3.19.1 Please see Appendix 2 for a detailed review of the concept of threshold land
value and the methodology used in identifying suitable values.
3.19.2 As detailed in the appendix, for the purposes of this study the following TLVs for
greenfield sites across Doncaster have been adopted:
Area Definition (£ per sq. m) TLV range (£ per gross Ha)
Low value area £1,500 £200,000
Medium value area £1,750 - £2,000 £270,000
High value area Over £2,250 £350,000
3.19.3 However, please note for significantly larger urban extension sites (400
units plus), and any strategic sites, we would expect a level of discount
from the above figures to reflect quantum.
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3.19.4 As for brownfield site types, for the purposes of the viability testing we have
looked to differentiate between cleared, brownfield sites and occupied,
brownfield sites, an approach which was supported by the stakeholder
engagement. For each, we have therefore adopted a different TLV, as follows:
Cleared, brownfield - £185,000 per Ha
Occupied, brownfield - £370,000 per Ha
3.20 Site Acquisition and Disposal Costs
3.20.1 The developments are assumed to proceed immediately and so no allowance
should be made for holding costs, or indeed any income arising from ownership
of the site prior to implementation. Acquisition Costs include stamp duty at the
prevalent rate and an allowance of 0.5% for acquisition legal fees, plus an
allowance for land registry fees. On larger, more complex sites an agent fee
(circa 1%) can be deemed appropriate.
3.21 Section 106 Contributions / Emerging Policy Aspirations
3.21.1 Emerging policies should be considered as part of the testing. In accordance
with the NPPF / PPG the Council policies should not undermine viability.
3.21.2 The Council have confirmed the following information on emerging draft policies
that have the potential to impact on viability, and the associated cost (which
may be subject to change):
Policy 15: Delivering the necessary range of housing – for sites providing
in excess of 15 units or 0.5 ha at 25% affordable provision (on-site)
o Tenure split should reflect the latest SHMA.
Policy 23: Promoting sustainable transport within new developments –
New developments may be required to make contributions towards
transport / highways infrastructure.
o For sites in excess of 50 dwellings the appraisals incorporate a
cost of £1,000 per dwelling.
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Policy 43: Open space provision in new developments – schemes
providing in excess of 10 dwellings will be asked to provide a percentage
of the gross site area as open space or provide a commuted sum in lieu.
For schemes providing 10 to 50 dwellings the requirement will be 13%
of the gross site area, but as a commuted sum. For schemes of 100
dwellings or more the requirement will be an on-site provision equivalent
to 18% of the gross site area.
Policy 46: Valuing biodiversity and geodiversity - a site specific policy
o For the purposes of the study this has been applied to sites
providing in excess of 50 dwellings, the appraisals incorporate
this cost, at a rate of £250 per dwelling.
Policy 67: Housing design standards – all homes will be required to meet
the Nationally Described Space Standards as a minimum. All new
housing should also be built to Part M4(2) of the current building
regulations.
Policy 77: New education facilities. May apply to sites in excess of 20
dwellings.
o For the purposes of the study this has been applied to sites
providing in excess of 50 dwellings, the appraisals incorporate
this cost, at a rate equivalent to £1,500 per dwelling.
Policy 80: Contamination and unstable land – some brownfield sites may
incur contaminated land / unstable land remediation costs.
o For the purposes of the study an allowance of £2,000 per unit
has been incorporated into the appraisals of the brownfield sites.
Policy 82: Flood risk management, the policy explains proposals in
Flood Risk Zones 2 & 3 will be required to mitigate residual risks.
o For the purposes of the study an allowance of £4,000 per unit
has been incorporated into the appraisals.
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3.22 Scenario testing / sensitivity analysis
3.22.1 As indicated above, the residual method used in viability testing is not without
its flaws, owing to the wide variety of inputs used in the approach (all of which
could be subject to variance, which can potentially lead to a wide range of
outputs in the appraisals making it more difficult to reach robust conclusions
from the data). Recognising this limitation, the PPG and the relevant
professional guidance for viability assessments advocates adopting scenario
testing / sensitivity analysis approach to Whole Plan viability studies.
3.22.2 At the stakeholder workshop, and from the completed questionnaires received,
there was a general agreement that scenario testing / sensitivity analysis should
consider fluctuations in sales values and build costs. There was also a general
view that testing should be focused on likely fluctuations in inputs and not test
changes which were unlikely to occur.
3.22.3 Having considered the above we have adopted the following approach to
scenario testing / sensitivity analysis:
Test 1 Adopts all draft Council policies detailed above in 3.21, except for
Policy 15 (i.e. 25% affordable housing). Instead, the level of affordable housing provision is adjusted up to a point where the scheme is considered to be viable (if possible, otherwise a nil provision is adopted). For ‘basic’ build costs, the BCIS lower quartile is adopted at £798 per sq. m.
Test 2 As Test 1, except the ‘basic’ build costs has been adjusted to the BCIS median figure of £900 per sq. m.
Test 3 As Test 1, except Council Policy 82 relating to flood risk mitigation (i.e. a cost in the appraisals of £4,000 per dwelling) is removed.
Test 4 As Test 1, except the sales revenue is increased by 5%.
Test 5 As Test 1, except the affordable dwellings (if any are demonstrated) are provided through the Starter Homes tenure basis only.
Test 6 As Test 1, except all draft Council planning policies (including affordable housing) are removed.
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3.22.4 As indicated above, as part of the testing process it is important to set at what
‘point’ a scheme is deemed to be viable or unviable. However, based on our
experience, viability is not necessarily ‘black and white’ and often reference is
made to schemes being ‘marginally viable’ (i.e. the return generated from the
scheme may be sufficient to attract some developers, but not necessarily all).
There is no specific guidance on how this should be considered within Whole
Plan testing, however the PPG is clear that Council policies should not be set
at ‘extremes’ of viability.
3.22.5 In this regard, and based on our experience, we have set the following
parameters for determining whether a scheme is viable or not:
Viable A scheme is deemed to be viable if the appraisal generates
a surplus which is equivalent to 2.50% (or higher) of the sales revenue. Schemes which meet this criteria are marked in green.
Marginally viable
A scheme is deemed to be marginally viable if the output from the appraisal falls within – (minus) 2.49% up to + 2.49% of the sales revenue. Scheme which meet this criteria are marked in orange.
Unviable A scheme is deemed to be unviable if the appraisal generates a deficit which is equivalent to – (minus) 2.50% (or lower) of the sales revenue. Schemes which meet this criteria are marked in red.
56
4. RESIDENTIAL – APPRAISAL RESULTS
4.1 Introduction
4.1.1 In undertaking our appraisals we have used the HCA Development Appraisal
Tool (“DAT”). This is an industry approved, free to download, cash flow toolkit.
The appraisal assumptions are inputted into the program, with the results
calculated through a cash flow. The program requires a fixed land value to be
inputted (in this case the identified TLV), as well as a fixed profit margin. The
toolkit then shows either a surplus or a deficit, based on these parameters.
4.1.2 As indicated above in 3.22.5, whether the scheme is deemed to be viable,
marginally viable, or unviable depends on the level of surplus / deficit generated
by the appraisal.
4.1.3 For ease of reference the typical locations attributed to the hypothetical value
areas are summarised below:
Urban Extension Site Testing
No Area/Site Location Value Corresponding Settlement(s)
1 & 2 Service Towns/
Villages: High
Auckley-Hayfield Green, Finningley, Bawtry, Tickhill, Sprotbrough, Barnburgh-
Harlington)
3 & 4
Doncaster Main Urban Area
Low Bentley
5,6 &7
Doncaster Main Urban Area
Medium Scawsby
8,9 &10
Main Town Medium Mexborough
11,12 &13
Main Town
Low / Medium
Conisbrough & Denaby
14,15,16,17,18,19,20 &
21 Main Towns Low
Thorne-Moorends Rossington Adwick-Woodlands
22,23 & 24 Main Towns,
Doncaster Main Urban Area & Service Village
Medium Hatfield-Stainforth & Armthorpe,
Edenthorpe & Barnby Dun
25 & 26
Service Towns
Medium Askern, Skellow & Carcroft
27 & 28
Service Town Low Edlington
57
Urban Settlement Site Testing
No Development Type 3 x value areas (high, medium & low)
Total number of site types to test
1, 2 & 3 Single dwelling greenfield infill plot H,M,L 3
4, 5 & 6 5 units cleared site H,M,L 3
7, 8 & 9 5 units occupied site H,M,L 3
10,11&12 14 units cleared site H,M,L 3
13,14 &15 14 units occupied site H,M,L 3
16,17 &18 50 units cleared site H,M,L 3
19, 20 & 21 50 units occupied site H,M,L 3
22, 23 & 24 100 units cleared site H,M,L 3
25, 26 & 27 100 units occupied site H,M,L 3
TOTAL 27
4.2 Test 1 – Council policies (bar affordable housing), BCIS lower quartile
4.2.1 Test 1 adopted a ‘basic’ build cost in line with the BCIS lower quartile, equivalent
to £798 per sq. m. The level of affordable housing was adjusted, initially to a
point where viability could be demonstrated (i.e. the surplus exceeded 2.5% of
the sales revenue). Where this was not possible the affordable housing level
was adjusted to zero.
The results have been split into separate tables for urban extension sites and
urban settlement sites, as follows:
58
Table 3 – Test 1 Urban extension viability results
No Site Value band No
units Afford
(%) Surplus /
deficit % of GDV
Viable
1 Town & village High 50 24.00% £1,322,296 12.65% Viable
2 Town & village High 100 24.00% £2,471,563 11.82% Viable
3 Doncaster main urban Low 50 0.00% -£176,472 -2.53% Unviable
4 Doncaster main urban Low 100 0.00% -£332,462 -2.39% Marginal
5 Doncaster main urban Medium 50 12.00% £234,294 2.88% Viable
6 Doncaster main urban Medium 100 12.00% £424,557 2.61% Viable
7 Doncaster main urban Medium 400 8.50% £1,865,374 2.87% Viable
8 Main town Medium 50 14.00% £236,738 2.91% Viable
9 Main town Medium 100 12.00% £424,557 2.61% Viable
10 Main town Medium 400 10.00% £1,784,332 2.74% Viable
11 Main town Low / med 50 0.00% £197,786 2.62% Viable
12 Main town Low / med 100 0.00% £329,602 2.18% Marginal
13 Main town Low / med 400 0.00% £1,034,489 1.71% Marginal
14 Main town Low 50 0.00% -£176,472 -2.53% Unviable
15 Main town Low 100 0.00% -£332,462 -2.39% Marginal
16 Main town Low 400 0.00% -£1,218,617 -2.19% Marginal
17 Main town Low 50 0.00% -£176,472 -2.53% Unviable
18 Main town Low 100 0.00% -£332,462 -2.39% Marginal
19 Main town Low 50 0.00% -£176,472 -2.53% Unviable
20 Main town Low 100 0.00% -£332,462 -2.39% Marginal
21 Main town Low 400 0.00% -£1,218,617 -2.19% Marginal
22 Town, Urban, Village Medium 50 24.00% £265,293 3.26% Viable
23 Town, Urban, Village Medium 100 12.00% £424,557 2.61% Viable
24 Town, Urban, Village Medium 400 9.75% £1,631,876 2.51% Viable
25 Service town Medium 50 12.00% £234,294 2.88% Viable
26 Service town Medium 100 12.00% £424,557 2.61% Viable
27 Service town Low 50 0.00% -£176,472 -2.53% Unviable
28 Service town Low 100 0.00% -£332,462 -2.39% Marginal
50 / 100 dwellings in high value areas are comfortably viable, providing 25% affordable.
Medium value schemes are all viable, broadly supporting a 12% affordable provision.
Low value scheme (or low / medium value areas) are at best only marginally viable even with a 0%
affordable housing provision.
In the medium value areas, generally speaking schemes of 50 units return the strongest viability
results when compared to schemes of 100 or 400.
59
Table 4 – Test 1 Urban settlement viability results
No Site Value band
No units
Afford (%)
Surplus / deficit
% of GDV
Viable
1 Green infill High 1 0.00% £57,145 27.34% Viable
2 Green infill Medium 1 0.00% £21,683 13.34% Viable
3 Green infill Low 1 0.00% £5,031 3.61% Viable
4 5 units cleared High 5 0.00% £291,185 27.86% Viable
5 5 units cleared Medium 5 0.00% £104,582 12.87% Viable
6 5 units cleared Low 5 0.00% £11,280 1.62% Marginal
7 5 units occupied High 5 0.00% £250,250 23.94% Viable
8 5 units occupied Medium 5 0.00% £63,647 7.83% Viable
9 5 units occupied Low 5 0.00% -£29,725 -4.27% Unviable
10 14 units cleared High 14 28.58% £449,857 15.37% Viable
11 14 units cleared Medium 14 14.28% £93,935 4.13% Viable
12 14 units cleared Low 14 0.00% -£59,591 -3.05% Unviable
13 14 units occupied High 14 28.58% £335,540 11.47% Viable
14 14 units occupied Medium 14 0.00% £70,076 3.08% Viable
15 14 units occupied Low 14 0.00% -£174,433 -8.94% Unviable
16 50 units cleared High 50 24.00% £1,460,789 13.98% Viable
17 50 units cleared Medium 50 14.00% £214,711 2.64% Viable
18 50 units cleared Low 50 0.00% -£306,987 -4.41% Unviable
19 50 units occupied High 50 24.00% £1,015,190 9.71% Viable
20 50 units occupied Medium 50 0.00% £82,049 1.01% Marginal
21 50 units occupied Low 50 0.00% -£757,883 -10.88% Unviable
22 100 units cleared High 100 25.00% £2,806,113 13.42% Viable
23 100 units cleared Medium 100 12.00% £470,676 2.90% Viable
24 100 units cleared Low 100 0.00% -£571,781 -4.10% Unviable
25 100 units occupied High 100 25.00% £1,727,587 8.26% Viable
26 100 units occupied Medium 100 0.00% £127,105 0.78% Marginal
27 100 units occupied Low 100 0.00% -£1,500,747 -10.77% Unviable
Single plots schemes are viable, regardless of value band. Affordable contributions do not apply.
Schemes comprising 5 dwellings are viable in high / medium value areas (again on the basis that
an affordable housing contribution is not applicable).
Schemes in high value areas providing 14, 50 or 100 dwellings are viable, with a 25% provision.
For cleared, brownfield sites in medium value areas, an affordable provision of circa 12% – 14% is
shown to be viable. Occupied brownfield sites, though, show a 0% affordable provision.
For sites within low value areas, regardless of the nature of the brownfield land, the results show
an unviable scheme for development comprising 14, 50 and 100 dwellings.
60
4.3 Test 2 – Council policies (bar affordable housing), BCIS median
4.3.1 Test 2 adopted a ‘basic’ build cost in line with the BCIS median, equivalent to
£900 per sq. m. The level of affordable housing was adjusted, initially to a point
where viability could be demonstrated (i.e. the surplus exceeded 2.5% of the
sales revenue). Where this was not possible the affordable housing level was
adjusted to zero.
4.3.2 Please note, for ease of reference we have split the results for urban extension
sites and urban settlement sites into separate tables, as follows:
Table 5 – Test 2 Urban extension viability results
No Site Value band No
units Afford
(%) Surplus /
deficit % of GDV Viable
1 Town & village High 50 24.00% £771,670 7.38% Viable
2 Town & village High 100 24.00% £1,427,927 6.83% Viable
3 Doncaster main urban Low 50 0.00% -£724,014 -10.39% Unviable
4 Doncaster main urban Low 100 0.00% -£1,376,995 -9.88% Unviable
5 Doncaster main urban Medium 50 0.00% -£15,214 -0.19% Marginal
6 Doncaster main urban Medium 100 0.00% -£41,234 -0.25% Marginal
7 Doncaster main urban Medium 400 0.00% -£1,763,747 -2.71% Unviable
8 Main town Medium 50 0.00% £9,278 0.11% Marginal
9 Main town Medium 100 0.00% -£41,234 -0.25% Marginal
10 Main town Medium 400 0.00% -£315,266 -0.48% Marginal
11 Main town Low / med 50 0.00% -£348,103 -4.61% Unviable
12 Main town Low / med 100 0.00% -£705,824 -4.68% Unviable
13 Main town Low / med 400 0.00% -£2,582,439 -4.28% Unviable
14 Main town Low 50 0.00% -£724,014 -10.39% Unviable
15 Main town Low 100 0.00% -£1,376,995 -9.88% Unviable
16 Main town Low 400 0.00% -£4,890,539 -8.77% Unviable
17 Main town Low 50 0.00% -£724,014 -10.39% Unviable
18 Main town Low 100 0.00% -£1,376,995 -9.88% Unviable
19 Main town Low 50 0.00% -£724,014 -10.39% Unviable
20 Main town Low 100 0.00% -£1,376,995 -9.88% Unviable
21 Main town Low 400 0.00% -£4,890,539 -8.77% Unviable
22 Town, Urban, Village Medium 50 0.00% -£15,214 -0.19% Marginal
23 Town, Urban, Village Medium 100 0.00% -£41,234 -0.25% Marginal
24 Town, Urban, Village Medium 400 0.00% -£315,266 -0.48% Marginal
25 Service town Medium 50 0.00% -£15,214 -0.19% Marginal
26 Service town Medium 100 0.00% -£41,234 -0.25% Marginal
27 Service town Low 50 0.00% -£724,014 -10.39% Unviable
28 Service town Low 100 0.00% -£1,376,995 -9.88% Unviable
61
Only schemes in high value areas are able to viably support any affordable housing provision (at
25% or thereabouts).
All other schemes demonstrate, at best, a marginally viable scheme (even with a nil affordable
housing provision).
Table 6 – Test 2 Urban settlement viability results
No Site Value band
No units
Afford (%)
Surplus / deficit
% of GDV Viable
1 Green infill High 1 0.00% £45,308 21.68% Viable
2 Green infill Medium 1 0.00% £9,846 6.06% Viable
3 Green infill Low 1 0.00% -£6,822 -4.90% Unviable
4 5 units cleared High 5 0.00% £232,319 22.23% Viable
5 5 units cleared Medium 5 0.00% £45,716 5.62% Viable
6 5 units cleared Low 5 0.00% -£47,698 -6.85% Unviable
7 5 units occupied High 5 0.00% £191,384 18.31% Viable
8 5 units occupied Medium 5 0.00% £4,781 0.59% Marginal
9 5 units occupied Low 5 0.00% -£88,730 -12.73% Unviable
10 14 units cleared High 14 28.58% £281,924 9.63% Viable
11 14 units cleared Medium 14 0.00% £19,748 0.87% Marginal
12 14 units cleared Low 14 0.00% -£224,927 -11.53% Unviable
13 14 units occupied High 14 28.58% £167,493 5.72% Viable
14 14 units occupied Medium 14 0.00% -£95,028 -4.18% Unviable
15 14 units occupied Low 14 0.00% -£339,769 -17.42% Unviable
16 50 units cleared High 50 24.00% £905,145 8.66% Viable
17 50 units cleared Medium 50 0.00% -£19,486 -0.24% Marginal
18 50 units cleared Low 50 0.00% -£859,983 -12.34% Unviable
19 50 units occupied High 50 24.00% £457,909 4.38% Viable
20 50 units occupied Medium 50 0.00% -£469,719 -5.78% Unviable
21 50 units occupied Low 50 0.00% -£1,311,877 -18.83% Unviable
22 100 units cleared High 100 25.00% £1,750,721 8.38% Viable
23 100 units cleared Medium 100 0.00% -£7,365 -0.05% Marginal
24 100 units cleared Low 100 0.00% -£1,637,292 -11.75% Unviable
25 100 units occupied High 100 25.00% £666,379 3.19% Viable
26 100 units occupied Medium 100 0.00% -£932,460 -5.74% Unviable
27 100 units occupied Low 100 0.00% -£2,570,578 -18.45% Unviable
Only schemes in high value locations are able to support an affordable housing provision (at 25%
or thereabouts). No other scheme can support an on-site affordable housing provision.
For single plot and 5 dwellings schemes, the medium value areas show a positive position on
viability, albeit on the basis that an affordable housing provision is not applicable. Schemes of a
similar size in low value areas are shown as being unviable.
62
For schemes comprising 14, 50 or 100 dwellings in medium or low value areas, only developments
of cleared brownfield sites in medium value areas show marginally viable outputs. All the rest show
an unviable return.
4.4 Test 3 – Estimated costs linked to Policy 83 Flood risk management are removed
4.4.1 Test 3 adopts the same assumptions as Test 1, except for the removal of
anticipated costs associated with Council Policy 83, which relates to flood risk
mitigation allowances.
4.4.2 Please note, for ease of reference we have split the results for urban extension
sites and urban settlement sites into separate tables, as follows:
Table 7 – Test 3 Urban extension viability results
No Site Value band No
units Afford
(%) Surplus /
deficit % of GDV Viable
1 Town & village High 50 24.00% £1,508,209 14.43% Viable
2 Town & village High 100 24.00% £2,821,559 13.50% Viable
3 Doncaster main urban Low 50 0.00% £11,490 0.16% Marginal
4 Doncaster main urban Low 100 0.00% £20,994 0.15% Marginal
5 Doncaster main urban Medium 50 22.00% £230,125 2.83% Viable
6 Doncaster main urban Medium 100 21.00% £429,486 2.64% Viable
7 Doncaster main urban Medium 400 17.50% £1,774,505 2.73% Viable
8 Main town Medium 50 24.00% £232,553 2.86% Viable
9 Main town Medium 100 20.00% £450,903 2.77% Viable
10 Main town Medium 400 18.75% £1,756,186 2.70% Viable
11 Main town Low / med 50 8.00% £188,312 2.49% Viable
12 Main town Low / med 100 8.00% £399,152 2.64% Viable
13 Main town Low / med 400 5.00% £1,614,998 2.67% Viable
14 Main town Low 50 0.00% £11,490 0.16% Marginal
15 Main town Low 100 0.00% £20,994 0.15% Marginal
16 Main town Low 400 0.00% £18,067 0.03% Marginal
17 Main town Low 50 0.00% £11,490 0.16% Marginal
18 Main town Low 100 0.00% £20,994 0.15% Marginal
19 Main town Low 50 0.00% £11,490 0.16% Marginal
20 Main town Low 100 0.00% £20,994 0.15% Marginal
21 Main town Low 400 0.00% £18,067 0.03% Marginal
22 Town, Urban, Village Medium 50 24.00% £451,999 5.56% Viable
23 Town, Urban, Village Medium 100 20.00% £412,374 2.54% Viable
24 Town, Urban, Village Medium 400 18.00% £1,634,178 2.51% Viable
25 Service town Medium 50 22.00% £230,125 2.83% Viable
26 Service town Medium 100 20.00% £450,903 2.77% Viable
27 Service town Low 50 0.00% £11,490 0.16% Marginal
28 Service town Low 100 0.00% £20,994 0.15% Marginal
63
50 or 100 dwelling schemes in high value areas are comfortably viable with 25% affordable.
Schemes in medium value areas all return viable schemes, with an improved affordable housing
provision (when compared to Test 1) of circa 18% – 25%
Schemes in low / medium value areas are viable with an affordable housing provision of 5% - 8%.
Schemes in low value areas are unable to deliver any affordable housing, however the viability
results are improved when compared to Test 1 (with all of the low value site tests showing a
marginally viable result, whereas in Test 1 a number of schemes were unviable).
Table 8 – Test 3 Urban settlement viability results
No Site Value band No
units Afford
(%) Surplus /
deficit % of GDV
Viable
1 Green infill High 1 0.00% £61,080 29.22% Viable
2 Green infill Medium 1 0.00% £25,618 15.76% Viable
3 Green infill Low 1 0.00% £8,966 6.43% Viable
4 5 units cleared High 5 0.00% £310,749 29.73% Viable
5 5 units cleared Medium 5 0.00% £124,146 15.27% Viable
6 5 units cleared Low 5 0.00% £30,845 4.43% Viable
7 5 units occupied High 5 0.00% £269,814 25.82% Viable
8 5 units occupied Medium 5 0.00% £83,211 10.24% Viable
9 5 units occupied Low 5 0.00% -£10,114 -1.45% Marginal
10 14 units cleared High 14 28.58% £504,552 17.24% Viable
11 14 units cleared Medium 14 21.43% £81,742 3.59% Viable
12 14 units cleared Low 14 0.00% -£4,664 -0.24% Marginal
13 14 units occupied High 14 28.58% £390,235 13.34% Viable
14 14 units occupied Medium 14 7.14% £57,882 2.54% Viable
15 14 units occupied Low 14 0.00% -£119,505 -6.13% Unviable
16 50 units cleared High 50 24.00% £1,646,089 15.75% Viable
17 50 units cleared Medium 50 22.00% £208,834 2.57% Viable
18 50 units cleared Low 50 0.00% -£119,691 -1.72% Unviable
19 50 units occupied High 50 24.00% £1,200,885 11.49% Viable
20 50 units occupied Medium 50 0.00% £212,704 2.62% Viable
21 50 units occupied Low 50 0.00% -£570,271 -8.18% Unviable
22 100 units cleared High 100 25.00% £3,157,447 15.11% Viable
23 100 units cleared Medium 100 22.00% £415,813 2.56% Viable
24 100 units cleared Low 100 0.00% -£212,695 -1.53% Marginal
25 100 units occupied High 100 25.00% £2,080,239 9.95% Viable
26 100 units occupied Medium 100 2.00% £406,217 2.50% Viable
27 100 units occupied Low 100 0.00% -£1,140,091 -8.18% Unviable
64
Single plots schemes are viable, regardless of value band. Affordable contributions do not apply.
5 dwelling scheme are mostly viable. Again, affordable contributions do not apply.
Schemes in high value areas providing 14, 50 or 100 dwellings are viable, with a 25% provision.
For cleared, brownfield sites (50 or 100 units) in medium value areas, an affordable provision of
circa 20% is demonstrated. For occupied brownfield sites, this reduces to a nominal 0% – 2%.
For schemes comprising 50 and 100 dwellings in low value areas generally the results show an
unviable scheme (even without affordable housing), and at best only marginally viable.
4.5 Test 4 – Sales revenue increased by 5%
4.5.1 Test 4 adopts the same assumptions as Test 1, except the sales revenues are
increased by 5%. Please note, the HCA DAT’s sensitivity function does not
adjust the level of affordable housing when sales revenues are increased. For
the purposes of the analysis, we have therefore shown the surplus / deficit of
the scheme based on the same affordable housing levels shown in Test 1.
4.5.2 Please note, for ease of reference we have split the results for urban extension
sites and urban settlement sites into separate tables, as follows:
Table 9 – Test 4 Urban extension viability results
No Site Value band No
units Afford
(%) Test 1 % of GDV
% of GDV
Viable Change
from Test 1
1 Town & village High 50 25.00% 12.65% 15.36% Viable 2.71%
2 Town & village High 100 24.00% 11.82% 14.40% Viable 2.58%
3 Doncaster main urban Low 50 0.00% -2.53% 1.06% Marginal 3.59%
4 Doncaster main urban Low 100 0.00% -2.39% 1.04% Marginal 3.43%
5 Doncaster main urban Medium 50 12.00% 2.88% 6.03% Viable 3.15%
6 Doncaster main urban Medium 100 12.00% 2.61% 5.61% Viable 3.00%
7 Doncaster main urban Medium 400 8.50% 2.87% 5.62% Viable 2.75%
8 Main town Medium 50 12.00% 2.91% 5.98% Viable 3.07%
9 Main town Medium 100 12.00% 2.61% 5.61% Viable 3.00%
10 Main town Medium 400 0.00% 2.74% 5.45% Viable 2.71%
11 Main town Low / med 50 0.00% 2.62% 6.19% Viable 3.57%
12 Main town Low / med 100 0.00% 2.18% 5.59% Viable 3.41%
13 Main town Low / med 400 0.00% 1.71% 4.72% Viable 3.01%
14 Main town Low 50 0.00% -2.53% 1.06% Marginal 3.59%
15 Main town Low 100 0.00% -2.39% 1.04% Marginal 3.43%
16 Main town Low 400 0.00% -2.19% 0.84% Marginal 3.03%
65
17 Main town Low 50 0.00% -2.53% 1.06% Marginal 3.59%
18 Main town Low 100 0.00% -2.39% 1.04% Marginal 3.43%
19 Main town Low 50 0.00% -2.53% 1.06% Marginal 3.59%
20 Main town Low 100 0.00% -2.39% 1.04% Marginal 3.43%
21 Main town Low 400 0.00% -2.19% 0.84% Marginal 3.03%
22 Town, Urban, Village Medium 50 24.00% 3.26% 5.98% Viable 2.72%
23 Town, Urban, Village Medium 100 13.00% 2.61% 5.61% Viable 3.00%
24 Town, Urban, Village Medium 400 9.75% 2.51% 5.23% Viable 2.72%
25 Service town Medium 50 12.00% 2.88% 6.03% Viable 3.15%
26 Service town Medium 100 13.00% 2.61% 5.61% Viable 3.00%
27 Service town Low 50 0.00% -2.53% 1.06% Marginal 3.59%
28 Service town Low 100 0.00% -2.39% 1.04% Marginal 3.43%
Increasing the GDV by 5%, as a broad average, improves the overall surplus generated by circa
3% (when expressed as a percentage of GDV). However, only 2 schemes improve from being
previously marginally viable to viable (and therefore could provide some affordable housing).
5 schemes improve from previously being unviable to showing a marginally viable return. However,
none have improved sufficiently to provide affordable housing.
In conclusion, the increase of the GDV by 5% (when build costs remain static) does not have a
significant impact on the viability conclusions, as it is not sufficient to change unviable / marginally
viable schemes into viable developments that can provide affordable housing.
Table 10 – Test 4 Urban settlement viability results
No Site Value band No
units Afford
(%) Test 1 % of GDV
% of GDV
Viable Change
from Test 1
1 Green infill High 1 0.00% 27.34% 31.39% Viable 4.05%
2 Green infill Medium 1 0.00% 13.34% 17.39% Viable 4.05%
3 Green infill Low 1 0.00% 3.61% 7.66% Viable 4.05%
4 5 units cleared High 5 0.00% 27.86% 31.88% Viable 4.02%
5 5 units cleared Medium 5 0.00% 12.87% 16.88% Viable 4.01%
6 5 units cleared Low 5 0.00% 1.62% 5.64% Viable 4.02%
7 5 units occupied High 5 0.00% 23.94% 27.96% Viable 4.02%
8 5 units occupied Medium 5 0.00% 7.83% 11.85% Viable 4.02%
9 5 units occupied Low 5 0.00% -4.27% -0.24% Marginal 4.03%
10 14 units cleared High 14 28.58% 15.37% 18.09% Viable 2.72%
11 14 units cleared Medium 14 14.28% 4.13% 7.39% Viable 3.26%
12 14 units cleared Low 14 0.00% -3.05% 0.76% Marginal 3.81%
13 14 units occupied High 14 28.58% 11.47% 14.18% Viable 2.71%
14 14 units occupied Medium 14 0.00% 3.08% 6.89% Viable 3.81%
66
15 14 units occupied Low 14 0.00% -8.94% -5.12% Unviable 3.82%
16 50 units cleared High 50 24.00% 13.98% 16.70% Viable 2.72%
17 50 units cleared Medium 50 12.00% 2.64% 6.08% Viable 3.44%
18 50 units cleared Low 50 0.00% -4.41% -0.79% Marginal 3.62%
19 50 units occupied High 50 20.00% 9.71% 12.44% Viable 2.73%
20 50 units occupied Medium 50 0.00% 1.01% 4.61% Viable 3.60%
21 50 units occupied Low 50 0.00% -10.88% -7.25% Unviable 3.63%
22 100 units cleared High 100 24.00% 13.42% 16.03% Viable 2.61%
23 100 units cleared Medium 100 12.00% 2.90% 5.93% Viable 3.03%
24 100 units cleared Low 100 0.00% -4.10% -0.61% Marginal 3.49%
25 100 units occupied High 100 25.00% 8.26% 10.84% Viable 2.58%
26 100 units occupied Medium 100 0.00% 0.78% 4.24% Viable 3.46%
27 100 units occupied Low 100 0.00% -10.77% -7.25% Unviable 3.52%
Again, increasing the GDV by 5%, as a broad average, improves the overall surplus generated by
circa 3% (when expressed as a percentage of GDV). However, only 3 schemes improve from being
previously marginally viable to viable.
4 schemes improve from previously being unviable to showing a marginally viable return. However,
none have improved sufficiently to provide affordable housing.
In conclusion, the increase of the GDV by 5% (when build costs remain static) does not have a
significant impact on the viability conclusions, as it is not sufficient to change unviable / marginally
viable schemes into viable developments that can provide affordable housing.
4.6 Test 5 – Starter Homes
4.6.1 Test 5 adopts the same assumptions as Test 1, except the affordable houses
(if demonstrated) are replaced (in full) by Starter Homes.
4.6.2 Please note, for ease of reference we have split the results for urban extension
sites and urban settlement sites into separate tables, as follows:
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Table 11 – Test 5 Urban extension viability results
No Site Value band No
units
Starter Homes
(%)
Surplus / deficit
% of GDV
Viable
1 Town & village High 50 24.00% £1,919,098 18.36% Viable
2 Town & village High 100 25.00% £3,596,703 17.21% Viable
3 Doncaster main urban Low 50 0.00% -£176,472 -2.53% Marginal
4 Doncaster main urban Low 100 0.00% -£332,462 -2.39% Marginal
5 Doncaster main urban Medium 50 24.00% £384,486 4.73% Viable
6 Doncaster main urban Medium 100 25.00% £696,532 4.28% Viable
7 Doncaster main urban Medium 400 25.00% £2,180,455 3.35% Viable
8 Main town Medium 50 24.00% £408,850 5.03% Viable
9 Main town Medium 100 25.00% £696,532 4.28% Viable
10 Main town Medium 400 25.00% £2,180,455 3.35% Viable
11 Main town Low / medium 50 0.00% £197,786 2.62% Viable
12 Main town Low / medium 100 0.00% £329,602 2.18% Marginal
13 Main town Low / medium 400 0.00% £1,034,489 1.71% Marginal
14 Main town Low 50 0.00% -£176,472 -2.53% Unviable
15 Main town Low 100 0.00% -£332,462 -2.39% Marginal
16 Main town Low 400 0.00% -£1,218,617 -2.19% Marginal
17 Main town Low 50 0.00% -£176,472 -2.53% Unviable
18 Main town Low 100 0.00% -£332,462 -2.39% Marginal
19 Main town Low 50 0.00% -£176,472 -2.53% Unviable
20 Main town Low 100 0.00% -£332,462 -2.39% Marginal
21 Main town Low 400 0.00% -£1,218,617 -2.19% Marginal
22 Town, Urban, Village Medium 50 24.00% £797,534 9.81% Viable
23 Town, Urban, Village Medium 100 25.00% £696,532 4.28% Viable
24 Town, Urban, Village Medium 400 25.00% £2,180,455 3.35% Viable
25 Service town Medium 50 24.00% £478,589 5.89% Viable
26 Service town Medium 100 25.00% £877,046 5.39% Viable
27 Service town Low 50 0.00% -£176,472 -2.53% Unviable
28 Service town Low 100 0.00% -£332,462 -2.39% Marginal
With the inclusion of starter homes, all developments in medium and high value areas are able to
support an affordable housing provision of 25%.
The adoption of starter homes does not impact on sites in low / low to medium value areas, which
are all still unable to provide any affordable housing.
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Table 12 – Test 5 Urban settlement viability results
No Site Value band No
units
Starter Homes
(%)
Surplus / deficit
% of GDV
Viable
1 Green infill High 1 0.00% £57,145 27.34% Viable
2 Green infill Medium 1 0.00% £21,683 13.34% Viable
3 Green infill Low 1 0.00% £5,031 3.61% Viable
4 5 units cleared High 5 0.00% £291,185 27.86% Viable
5 5 units cleared Medium 5 0.00% £104,582 12.87% Viable
6 5 units cleared Low 5 0.00% £11,280 1.62% Marginal
7 5 units occupied High 5 0.00% £250,250 23.94% Viable
8 5 units occupied Medium 5 0.00% £63,647 7.83% Viable
9 5 units occupied Low 5 0.00% -£29,725 -4.27% Unviable
10 14 units cleared High 14 28.57% £662,413 22.64% Viable
11 14 units cleared Medium 14 28.57% £168,588 7.41% Viable
12 14 units cleared Low 14 0.00% -£59,591 -3.05% Unviable
13 14 units occupied High 14 28.57% £546,676 18.68% Viable
14 14 units occupied Medium 14 0.00% £70,076 3.08% Viable
15 14 units occupied Low 14 0.00% -£174,433 -8.94% Unviable
16 50 units cleared High 50 26.00% £2,147,287 20.55% Viable
17 50 units cleared Medium 50 26.00% £475,546 5.85% Viable
18 50 units cleared Low 50 0.00% -£306,987 -4.41% Unviable
19 50 units occupied High 50 24.00% £1,705,717 16.32% Viable
20 50 units occupied Medium 50 0.00% £82,049 1.01% Marginal
21 50 units occupied Low 50 0.00% -£757,883 -10.88% Unviable
22 100 units cleared High 100 25.00% £4,110,075 19.66% Viable
23 100 units cleared Medium 100 25.00% £742,715 4.57% Viable
24 100 units cleared Low 100 0.00% -£571,781 -4.10% Unviable
25 100 units occupied High 100 25.00% £3,209,329 15.35% Viable
26 100 units occupied Medium 100 0.00% £127,105 0.78% Marginal
27 100 units occupied Low 100 0.00% -£1,500,747 -10.77% Unviable
The results for sites 1 – 9 (where affordable housing is not applicable) remain unchanged.
For cleared, brownfield sites those located in medium and high value areas are able to support a
25% affordable provision. Sites in low value areas are unable to support any starter homes.
For occupied, brownfield sites only developments in high value areas can support a 25% provision.
Sites located in medium and low value areas are unable to provide any starter homes.
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4.7 Test 6 – All draft Council planning policies removed
4.7.1 Test 6 adopts the same assumptions as Test 1, except the S106 obligations
(including affordable housing) are removed. The results therefore simply show
whether the scheme is viable, marginally viable or unviable with no S106
obligations.
4.7.2 Please note, for ease of reference we have split the results for urban extension
sites and urban settlement sites into separate tables, as follows:
Table 13 – Test 6 Urban extension viability results
No Site Value band No
units Surplus /
deficit % of GDV Viable
1 Town & village High 50 £2,181,000 20.87% Viable
2 Town & village High 100 £4,117,141 19.70% Viable
3 Doncaster main urban Low 50 -£51,472 -0.74% Marginal
4 Doncaster main urban Low 100 -£95,632 -0.69% Marginal
5 Doncaster main urban Medium 50 £652,620 8.03% Viable
6 Doncaster main urban Medium 100 £1,224,493 7.53% Viable
7 Doncaster main urban Medium 400 £4,092,697 6.29% Viable
8 Main town Medium 50 £676,945 8.33% Viable
9 Main town Medium 100 £1,224,493 7.53% Viable
10 Main town Medium 400 £4,092,697 6.29% Viable
11 Main town Low / medium 50 £322,143 4.27% Viable
12 Main town Low / medium 100 £565,272 3.74% Viable
13 Main town Low / medium 400 £1,853,252 3.07% Viable
14 Main town Low 50 -£51,472 -0.74% Marginal
15 Main town Low 100 £256,918 1.84% Marginal
16 Main town Low 400 -£394,051 -0.71% Marginal
17 Main town Low 50 -£51,472 -0.74% Marginal
18 Main town Low 100 -£95,632 -0.69% Marginal
19 Main town Low 50 -£51,472 -0.74% Marginal
20 Main town Low 100 -£95,632 -0.69% Marginal
21 Main town Low 400 -£394,051 -0.71% Marginal
22 Town, Urban, Village Medium 50 £652,620 8.03% Viable
23 Town, Urban, Village Medium 100 £1,224,493 7.53% Viable
24 Town, Urban, Village Medium 400 £4,092,697 6.29% Viable
25 Service town Medium 50 £652,620 8.03% Viable
26 Service town Medium 100 £1,224,493 7.53% Viable
27 Service town Low 50 -£51,472 -0.74% Marginal
28 Service town Low 100 -£95,632 -0.69% Marginal
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All schemes in low / medium, medium and high value areas show a viable scheme when all draft
Council Planning Policies are removed.
Schemes in low value areas are still only marginally viable, even if draft Council policies are
removed.
Table 14 – Test 6 Urban settlement viability results
No Site Value band No
units Surplus /
deficit % of GDV Viable
1 Green infill High 1 £57,145 27.34% Viable
2 Green infill Medium 1 £21,683 13.34% Viable
3 Green infill Low 1 £5,031 3.61% Viable
4 5 units cleared High 5 £291,185 27.86% Viable
5 5 units cleared Medium 5 £104,582 12.87% Viable
6 5 units cleared Low 5 £11,280 1.62% Marginal
7 5 units occupied High 5 £250,250 23.94% Viable
8 5 units occupied Medium 5 £63,647 7.83% Viable
9 5 units occupied Low 5 -£29,725 -4.27% Unviable
10 14 units cleared High 14 £693,014 23.68% Viable
11 14 units cleared Medium 14 £198,250 8.71% Viable
12 14 units cleared Low 14 -£49,607 -2.54% Unviable
13 14 units occupied High 14 £578,760 19.78% Viable
14 14 units occupied Medium 14 £83,765 3.68% Viable
15 14 units occupied Low 14 -£164,448 -8.43% Unviable
16 50 units cleared High 50 £2,319,697 22.20% Viable
17 50 units cleared Medium 50 £655,715 8.07% Viable
18 50 units cleared Low 50 -£181,324 -2.60% Unviable
19 50 units occupied High 50 £1,875,015 17.94% Viable
20 50 units occupied Medium 50 £207,347 2.55% Viable
21 50 units occupied Low 50 -£632,043 -9.07% Unviable
22 100 units cleared High 100 £4,459,872 21.34% Viable
23 100 units cleared Medium 100 £1,276,449 7.85% Viable
24 100 units cleared Low 100 -£330,298 -2.37% Marginal
25 100 units occupied High 100 £3,561,149 17.04% Viable
26 100 units occupied Medium 100 £366,352 2.25% Marginal
27 100 units occupied Low 100 -£1,258,238 -9.03% Unviable
All but one of the scenarios in medium or high value areas show a viable scheme.
There is still viability pressure on schemes in low value areas, even if all of the draft Council policies
are removed.
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4.8 Conclusions
4.8.1 Schemes in low value areas, regardless of size and scenario test, were shown
to be unable to support any level of affordable housing.
4.8.2 Schemes in high value areas, regardless of size and scenario test, were shown
to comfortably support an affordable housing provision of 25% (whether this
includes starter homes or not).
4.8.3 Schemes within medium value areas showed a fluctuation in the level of
affordable housing provision that could be viably supported, depending on the
size of the scheme, nature of the land and the specific scenario test (ranging
from 0% – 25%). However, taking into account the various tests, we would
suggest circa 10% – 15% as being a fair representation as to the average level
of affordable housing scheme in medium value areas could support.
4.8.4 Taking into account the above, we conclude that a policy ‘starting’ point of 25%
appears out of kilter for most schemes likely to be brought forward across
Doncaster (which will be located in low and medium value areas).
4.8.5 For schemes within low to medium value areas we would suggest 15% as being
a more appropriate aspiration (with 25% retained for higher value locations).
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5. NON-RESIDENTIAL – VIABILITY ASSUMPTIONS
5.1 Introduction
5.1.1 This section of the report sets out the assumptions and appraisal inputs used in
the appraisal testing of non-residential development sites.
5.2 Site Types
5.2.1 In line with the residential testing, and having discussed testing options through
the Stakeholder Workshop and the subsequent questionnaire, we again
decided to adopt hypothetical site testing for the assessment of non-residential
development.
5.2.2 Having discussed the nature of the hypothetical sites with the Council and the
stakeholders, and having researched the local market dynamics, we have
adopted the following hypothetical development sites for the purposes of the
appraisal testing:
- Strategic warehouse, total gross internal area 50,000 sq. m.
- Non-strategic warehouse, total gross internal are 20,000 sq. m
- Industrial and manufacturing, total gross internal area 10,000 sq. m
- Industrial and manufacturing, total gross internal area 5,000 sq. m
- Industrial and manufacturing, total gross internal area 2,000 sq. m
- Supermarket, total gross internal area 4,000 sq. m, greenfield site
- Supermarket, total gross internal area 4,000 sq. m, cleared brownfield site
- Supermarket, total gross internal area 1,500 sq. m, greenfield site
- Supermarket, total gross internal area 1,500 sq. m, cleared brownfield site
- Office, total net internal area 500 sq. m
- Office, total net internal area 200 sq. m
- Town centre retail, net internal area 150 sq. m
- Hotel (Travel Lodge, Premier Inn etc.), gross internal area 3,000 sq. m
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5.3 Methodology
5.3.1 In undertaking our assessment we have again adopted an appraisal approach
(outlined above in 2.4). This involves identifying the value of the completed
scheme (gross development value), and from this netting of the costs of the
development. In line with the residential testing we have adopted a fixed level
of profit within each appraisal, as well as a fixed land value (the Threshold Land
Value). If the residual amount left over is a surplus which exceeds 2.5% of the
gross development value, then the scheme is deemed to be viable. If the
scheme produces a deficit, which falls below – (minus) 2.5% of the gross
development value the scheme is considered to be unviable. If the residual
amount falls within these two parameters the scheme is considered to be
marginally viable.
5.4 Evidence
5.4.1 For non-residential (or commercial) property, where direct capital evidence is
less abundant than the residential market, a slightly different approach can be
adopted. This involves identifying what is considered to be the annual Market
Rent for the property. Once this is established, this is then capitalised using an
investment yield (essentially a market multiplier) to arrive at a capital value. For
example, for a 1,000 sq. m industrial unit the Market Rent identified, based on
comparable evidence, may equate to say £50 per sq. m. This therefore gives a
Market Rent (essentially a gross annual income) of £50,000 per annum. To
arrive at a capital value an appropriate investment yield is identified, again
established by considering comparable evidence. If that gross initial yield is say
8% (12.5 as a market multiplier) the ‘end value’ of the industrial unit is 12.5
multiplied by £50,000, which equals £625,000. This is then inputted into the
viability appraisal as being the ‘GDV’ of the site.
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5.4.2 As part of HMRC / VOA we have detailed information on all commercial
transactions (sales and lettings). This is used primarily in the assessment of
business rates for non-residential property, but can be equally used in the
assessment of Market Rents and investment yields for commercial property. For
the purposes of this study we have subsequently drawn upon this information
to identify rental and capital values for the various property types. We have also
used public access websites (available through licenses), including Costar
SUITE and EGi to ensure a robust evidence base.
5.4.3 We have identified the following rental and yield ranges for the different property
types, which vary due to locational factors:
Table 15 – Non-residential Market Rent and yield ranges
Development Type
Unit size
(sq. m)
Rental range
(£ per sq. m)
Gross Initial
Yield range
(%)
Strategic warehouse 50,000 £43 - £51 5.75% – 8.4%
Non-strategic warehouse 20,000 £40 - £51 5.75% – 8.4%
Industrial & manufacturing 10,000 £30 - £62 6% – 8.4%
Industrial & manufacturing 5,000 £32 - £48 6% – 8.4%
Industrial & manufacturing 2,000 £20 - £53 6% – 8.4%
Supermarket 4,000 £135 - £230 5.5% – 8%
Supermarket 4,000 £135 - £230 5.5% – 8%
Supermarket 1,500 £115 - £170 5.5% – 6.5%
Supermarket 1,500 £115 - £170 5.5% – 6.5%
Office 500 £53 - £129 7%– 11%
Office 200 £59 - £183 7%– 11%
Town centre retail 150 £61 - £375 6% – 8.5%
Hotel 3,000 £59 - £87 5.5% – 6.5%
Please note, the above ranges reflect comparables from properties broadly
similar in size to the non-residential site typologies. The data is also derived
from non-residential property across the Doncaster Borough, and therefore
reflects market fluctuations based on locational factors.
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5.4.4 From the range of identified evidence we have adopted appropriate rental rates
and yields for the various hypothetical sites tests.
5.4.5 Having identified appropriate GDV’s for the various development types we have
then considered other key appraisal inputs, drawing upon other non-residential
schemes we have appraised:
Table 16 – Non-residential key appraisal inputs
Appraisal input
Comment
Threshold Land
Value (“TLV”)
For the purposes of the testing we have assumed
cleared brownfield sites, with a TLV equivalent to
£185,325 per Ha (£75k / acre). The only exception is
supermarket site types, where we have assumed a
scenario both brownfield (cleared) and separately
greenfield, the latter at £271,810 per Ha (£110k /
acre)
Basic build cost For the residential sites we were able to draw on a
variety of information sources regarding build costs.
For non-residential sites that information is more
limited. We have subsequently placed a greater
reliance on data from the BCIS, which suggests the
following:
- Strategic warehouse £446 per sq. m
- Non-strategic warehouse £446 per sq. m
- Industrial (2,000 to 10,000 sq. m) £446 per sq. m
- Supermarket (small and large) £951 per sq. m
- Office 500 sq. m £1,228 per sq. m
- Office 200 sq. m £1,052 per sq. m
- Town centre retail £644 per sq. m
- Hotel £1,405 per sq. m
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Externals This will vary depending on the nature of the
scheme. For example, a small retail unit ‘in town’ will
require significantly less space than say a
supermarket, which would require a large amount of
car parking. For the purposes of our assessment we
consider a range of 5% – 10% to be appropriate,
again dependent on the specific scheme.
Contingency From our experience, we consider 3% to be
reasonable for the assessment of non-residential
development sites.
Professional fees Given that non-residential schemes tend to require
more individual thought and design than standard
housing products delivered by volume house
building, we have adopted professional fees of 8%.
Draft Policy 23:
Promoting
sustainable
transport within new
developments
This draft policy is intended to apply for larger
development sites. Having discussed this with the
Council we have made an allowance of £100,000 per
Ha for the strategic warehouse, non-strategic
warehouse, all industrial and supermarket site types.
Draft Policy 46:
Valuing biodiversity
and geodiversity
Having discussed this with the Council we have
made an allowance of £10,000 per Ha for each site
type.
Draft Policy 70:
Design of non-
residential,
commercial and
employment
developments
Major proposals are expected to meet BREEAM
rating of ‘very good’ and 10% renewables. This is
assumed to have been allowed for within the BCIS
rate applied.
77
Draft Policy 80:
Contamination and
unstable land
Considered applicable to brownfield sites only.
Having discussed this with the Council a rate of
£35,000 per Ha is considered reasonable for
inclusion in the appraisal testing.
Draft Policy 83:
Flood risk
management
For the purposes of the initial testing, and having
discussed this with the Council, each site type has
been assumed to require flood risk mitigation
measures, at a cost equivalent to £140,000 per Ha.
Agency / legal fees Based on our experience, and other non-residential
schemes we have appraised, for the letting of the
accommodation we have adopted a 10% (of the
annual Market Rent) agent letting fee together with a
5% legal fee. For the investment sale of the
accommodation when fully let we have allowed a 1%
agency fee (of the sale price agreed) and a 0.5%
legal fee.
Finance We have adopted a debit interest rate of 6%.
Developer’s Profit For non-residential accommodation the level of profit
is often gauged against the cost of delivering the
scheme (rather than the GDV, which tends to be the
convention with residential property). Furthermore,
the level of profit on cost will vary dependent on
whether the scheme is speculative or not. In other
words, if the property has been ‘pre-let’ (i.e. a tenant
has signed up to a tenancy) before the construction
works have commenced, then the risk associated
with the scheme is considered to be significantly
lower. From our experience, for a ‘pre-let’
development a profit margin of 12.5% of cost is
generally acceptable. If, though, the scheme is
entirely speculative (i.e. the tenants will be identified
after the accommodation has been constructed) then
the level of profit on cost, in our experience,
78
increases to 15% on cost. This reflects the potential
for voids that would be incurred whilst a tenant is
identified.
For the purposes of this assessment, we have
assumed that the hotel, strategic warehouse, non-
strategic warehouse and supermarkets would be
built on a ‘pre-let’ basis, and have therefore applied
a profit margin of 12.5% on cost. For all other
development types we have assumed the
developments would be speculative and have
subsequently increased the profit margin to 15% on
cost.
5.5 Scenario testing / sensitivity analysis
5.5.1 As indicated above, the residual method used in viability testing is not without
its flaws, owing to the wide variety of inputs used in the approach (all of which
could be subject to variance, which can potentially lead to a wide range of
outputs in the appraisals making it more difficult to reach robust conclusions
from the data). Recognising this limitation, the PPG and the relevant
professional guidance for viability assessments advocates adopting scenario
testing / sensitivity analysis approach to Whole Plan viability studies.
5.5.2 At the stakeholder workshop, and from the completed questionnaires received,
there was a general agreement that scenario testing / sensitivity analysis should
consider fluctuations in sales values and build costs. There was also a general
view that testing should be focused on likely fluctuations in inputs and not test
changes which were unlikely to occur.
5.5.3 Having considered the above we have adopted the following approach to
scenario testing / sensitivity analysis:
Test 1 Adopts all applicable draft Council policies
Test 2 Excludes all draft Council policies
Test 3 Excludes flood risk mitigation costs only
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5.5.4 As indicated above, as part of the testing process it is important to set a ‘point’
in which a scheme is deemed to be viable or unviable. However, based on our
experience, viability is not necessarily ‘black and white’ and often reference is
made to schemes being ‘marginally viable’ (i.e. the return generated from the
scheme may be sufficient to attract some developers, but not necessarily all).
There is no specific guidance on how this should be considered within Whole
Plan testing, however the PPG is clear that Council policies should not be set
at ‘extremes’ of viability.
5.5.5 In this regard, and based on our experience, we have set the following
parameters for determining whether a scheme is viable or not:
Viable A scheme is deemed to be viable if the appraisal generates
a surplus which is equivalent to 2.50% (or higher) of the sales revenue. Schemes which meet this criteria are marked in green.
Marginally viable
A scheme is deemed to be marginally viable if the output from the appraisal falls within – (minus) 2.49% up to + 2.49% of the sales revenue. Scheme which meet this criteria are marked in orange.
Unviable A scheme is deemed to be unviable if the appraisal generates a deficit which is equivalent to – (minus) 2.50% (or lower) of the sales revenue. Schemes which meet this criteria are marked in red.
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6. NON-RESIDENTIAL – VIABILITY ASSUMPTIONS
6.1 Introduction
6.1.1 In undertaking our appraisals we have used ARGUS. This is an industry
approved, cash flow toolkit, designed primarily for commercial development.
The appraisal assumptions are inputted into the program, with the results
calculated through a cash flow. The program requires a fixed land value to be
inputted (in this case the identified TLV), as well as a fixed profit margin. The
toolkit then shows either a surplus or a deficit, based on these parameters.
6.1.2 Whether the scheme is deemed to be viable, marginally viable, or unviable
depends on the level of surplus / deficit generated by the appraisal.
6.2 Test 1 – Council policies
6.2.1 This tests each commercial scenario site type on the assumption that all draft
Council policies are included within the assessment.
Table 17 – Test 1 Council policy appraisal results
Type Transport Green infra
Land remed
Flood risk
Surplus / deficit % of GDV Viable
Hotel £0 £1,000 £3,500 £14,000 £454,327 6.76% Viable
Strategic Warehouse £600,000 £60,000 £210,000 £840,000 £4,471,192 10.66% Viable
Supermarket - green £180,000 £18,000 £0 £252,000 £4,342,576 32.47% Viable
Supermarket - brown £180,000 £18,000 £63,000 £252,000 £4,440,741 33.21% Viable
Supermarket - green £0 £5,000 £0 £70,000 £691,480 19.81% Viable
Supermarket - brown £0 £5,000 £17,500 £70,000 £718,747 20.60% Viable
Industrial £150,000 £15,000 £52,500 £210,000 -£1,961,875 -37.20% Unviable
Industrial £75,000 £7,500 £26,250 £105,000 -£980,937 -37.20% Unviable
Industrial £35,000 £3,500 £12,250 £49,000 -£462,277 -41.64% Unviable
Large office £0 £1,000 £3,500 £14,000 -£539,273 -102.40% Unviable
Small office £0 £1,000 £3,500 £14,000 -£178,625 -71.45% Unviable
Non-strategic warehouse £300,000 £30,000 £105,000 £420,000 £61,376 0.41% Marginal
Town centre shop £0 £170 £595 £2,380 £21,206 6.46% Viable
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7 of the 13 commercial site types tested return a viable result. This includes all iterations
of supermarket development, a hotel scheme, a strategic warehouse scheme and a
town centre shop. To the most part these are considered to be comfortably viable, and
would still produce a viable results even if some costs were to increase marginally.
5 of the remaining schemes produced an unviable result. It is stressed that the losses
generated by these schemes were significant (and include industrial and office
development).
The only marginally viable scheme was non-strategic warehousing.
6.3 Test 2 – Excludes all Council policies
6.3.1 This tests each commercial scenario site type on the assumption that all draft
Council policies are excluded within the assessment.
Table 18 – Test 2 No Council policy appraisal results
Type Surplus /
deficit GDV % of GDV Viable
Hotel £472,118 £6,723,748 7.02% Viable
Strategic Warehouse £6,076,452 £41,936,479 14.49% Viable
Supermarket - green £4,764,676 £13,373,546 35.63% Viable
Supermarket - brown £4,920,349 £13,373,546 36.79% Viable
Supermarket - green £763,650 £3,489,875 21.88% Viable
Supermarket - brown £806,893 £3,489,875 23.12% Viable
Industrial -£1,531,391 £5,273,658 -29.04% Unviable
Industrial -£765,696 £2,636,829 -29.04% Unviable
Industrial -£361,504 £1,110,244 -32.56% Unviable
Large office -£520,259 £526,620 -98.79% Unviable
Small office -£159,630 £250,000 -63.85% Unviable
Non-strategic warehouse £854,639 £14,801,110 5.77% Viable
Town centre shop £24,249 £328,312 7.39% Viable
The non-strategic warehouse scheme changes from being previously unviable (when
the Council policies were applied), to be being viable (when the Council policies were
removed). For this particular development type the level of Council policies is therefore
a key determinant of viability.
82
The 5 commercial site types that were unviable when the Council policies were applied
(industrial and office) remain unviable when the Council policies are removed. In this
respect, the level of Council policy is not a determining factor in viability, because the
schemes remain unviable regardless of the level of Council policies. The lack of viability
is therefore down to market factors (primarily that the cost of building industrial and
office schemes significantly outweighs the ‘end values’ achievable).
The remaining site types remain comfortably viable.
6.4 Test 3 – Excludes all Council policies except for flood risk mitigation costs
6.4.1 This tests each commercial scenario site type on the assumption that all draft
Council policies are excluded within the assessment, except for flood risk
mitigation costs.
Table 19 – Test 3 No Council policy (except flood risk mitigation) appraisal results
Type Flood risk Surplus /
deficit GDV % of GDV Viable
Hotel £14,000 £458,495 £6,723,748 6.82% Viable
Strategic Warehouse £840,000 £5,271,637 £41,936,479 12.57% Viable
Supermarket - green £252,000 £4,523,822 £13,373,546 33.83% Viable
Supermarket - brown £252,000 £4,679,495 £13,373,546 34.99% Viable
Supermarket - green £70,000 £696,182 £3,489,875 19.95% Viable
Supermarket - brown £70,000 £739,424 £3,489,875 21.19% Viable
Industrial £210,000 -£1,748,660 £5,273,658 -33.16% Unviable
Industrial £105,000 -£874,330 £2,636,829 -33.16% Unviable
Industrial £49,000 -£412,526 £1,110,244 -37.16% Unviable
Large office £14,000 -£534,862 £526,620 -101.57% Unviable
Small office £14,000 -£174,213 £250,000 -69.69% Unviable
Non-strategic warehouse £420,000 £452,236 £14,801,110 3.06% Viable
Town centre shop £2,380 £21,915 £328,312 6.68% Viable
Again, the non-strategic warehouse scheme changes from being previously unviable
(when the Council policies were applied), to be being viable (when just the flood
mitigation costs are applied).
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The 5 commercial site types that were unviable when the Council policies were applied
(industrial and office) remain unviable when only the flood mitigation costs are included.
Again, in this respect, the level of Council policy is not a determining factor in viability.
The remaining site types remain comfortably viable.
6.5 Conclusions
6.5.1 Based on the above results, we conclude that the draft Council policies would
not serve to undermine viability for the following site types:
- Hotel
- Supermarket (regardless of size or site type)
- Strategic warehouse
- Town centre shop
6.5.2 However, there is currently a fundamental lack of viability for industrial and office
development sites across the Borough. This is to the extent that, even if all
Council policies are removed, the schemes are still likely to face significant
viability pressures owing to macro market forces (i.e. the ‘end values’ in building
industrial and office schemes are not sufficient to outweigh the costs of
development).
6.5.3 Based on the testing undertaken, the only scheme that would have a significant
benefit from a removal of Council policies would be non-strategic warehousing.
When the Council policies are applied this returns only a marginally viable
scheme. Reducing these policies therefore serves to create a viable project.
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7. FINAL COMMENTS
7.1 The assessment of viability has been undertaken in accordance with the requirements
the NPPF / PPG, adopting a collaborative approach where we have actively sought to
engage with stakeholders.
7.2 The approach has been the same for testing residential and non-residential
development sites; assessing hypothetical sites through a residual appraisal approach.
Assumptions within these appraisals has been based on robust evidence, which has
been presented to stakeholders inviting challenge.
7.3 In assessing a sites viability status we have adopted a 3 tier approach; concluding that
each site is either viable, marginally viable or unviable (in accordance with a pre-
determined criteria based on the surplus / deficit as a percentage of the overall scheme
revenue).
7.4 It is acknowledged that the residual approach has its limitations (principally that the
wide level of inputs within an appraisal can mean that small changes to some or many
of these inputs can significantly impact on the overall appraisal outcome). Recognising
these limitations, and in accordance with viability guidance, as well as feedback from
stakeholders, we have subsequently used sensitivity analysis, which involves running
various scenario tests, varying certain key inputs to examine the impact these have on
the overall conclusions (such as sales revenue, build costs, Council policies etc.).
7.5 For the residential testing, based on the sensitivity analysis approach, we have
concluded that the policy aspiration of 25% is appropriate for schemes located in high
value areas, as well as the other Council policy asks (including flood risk mitigation
works, education contributions, highways etc.). However, for schemes in medium to
low value areas we believe that this aspirational figure is unrealistic. Instead, and as a
‘starting point’, we believe a 15% affordable housing provision would be more
appropriate (albeit viability will still need to be determined on a site by site basis), in
addition to the other Council policy asks. Please note, in arriving at this conclusion we
have factored in the forthcoming introduction of Starter Homes, which is likely to have
a positive impact (in viability terms) on residential schemes located in medium value
areas.
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7.6 For the commercial testing, again based on the sensitivity analysis approach, we have
concluded that hotels, strategic warehousing, all supermarket types and town centre
shops are showing viable schemes, even when the Council’s draft policies are applied.
7.7 However, for industrial and office schemes, due to current difficult market conditions,
the appraisals are showing unviable projects returning significant deficits (even when
the Council’s policies are removed). In this regard, even if the Council removes its
policies, the current market forces ensure that industrial and office schemes are likely
to remain unviable, and therefore are likely to face pressure on deliverability.
7.8 The only commercial scheme where the outcome is marginally viable is non-strategic
warehousing. The application of the full Council policies means that schemes of this
nature are likely to only be marginally viable. Viability is subsequently improved if these
policy asks are reduced.
David Newham RICS Registered Valuer, Principal Surveyor DVS Draft report and study August 2016 -
Cecilia Reed MRICS RICS Registered Valuer, Sector Leader Viability DVS Final report June 2017
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Appendix 1 Doncaster Housing Market Review
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APPENDIX 1
HOUSING MARKET ANALYSIS - LOCAL MARKET CONDITIONS
1.0 Introduction
1.1 This section provides an assessment of local market conditions and the evidence
base for the assumptions on house prices used in our financial appraisals.
1.2 We have considered average values across the Doncaster Borough. It is important
to stress that a series of factors will influence values and that, although
development schemes do have similarities, every site is unique. Consequently,
whilst market conditions in general will broadly reflect national economic
circumstances and local supply/demand factors, within an area there will be
particular localities and site-specific factors that generate different values and costs.
The range of sites tested in this study allows assessment of viability across varying
localities for this reason.
1.3 The comments below relate to prevailing market conditions at the valuation date
(August 2016). It should be stressed that values fluctuate and that assessments of
viability will alter over relatively short periods of time.
2.0 Market Overview
2.1 In recent years there has been a general feeling of improvement in the residential
market across the UK. This is supported by anecdotal evidence from both estate
agents and house builders, who in some cases have indicated that demand levels
have returned to ‘pre-crash’ levels (i.e. pre 2008).
2.2 That said, in certain areas there have been signs of values levelling / contracting
during the last 3 – 6 months. The EU Referendum decision in June 2016 has
undoubtedly created uncertainty across the property market and may be a factor in
this short term trend. However, the medium term impact of the decision is still as
yet unclear, therefore for the purposes of this study we are unable robustly conclude
whether the impact will be positive or negative. For this reason we have not made
a specific allowance in house values (up or down) to reflect the EU Referendum
decision, but have instead relied purely on existing sales evidence.
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2.3 As a general comment, there is still considered to be an under-supply of housing
across country, and therefore strong demand (particularly from first time buyers)
will continue to underpin house price growth. Furthermore, the Government’s Help
to Buy scheme has been extended until 2020 (which is seen as major benefit to
first time buyers looking to purchase new build homes). Equally, the introduction of
the Housing and Planning Act 2016 includes various initiatives designed to increase
house delivery, and as part of this the introduction of Starter Homes (available at
an 80% discount of Market Value) will help first time buyers enter the market.
3.0 Postcode Areas and New Build Sales Evidence
3.1 As part of our research we have looked at average value trends across the different
postcode locations of Doncaster Borough.
3.2 Furthermore, as part of HMRC / VOA we have access to detailed information on all
residential transactions (submitted through Stamp Duty Land Tax returns), as well
as additional details held on individual properties used in determining Council Tax
bands. For the purposes of this study we have subsequently looked to identify
average values (on a per sq m basis) of dwellings within modern residential estates.
We have limited the evidence to estates that fall within (or at least close to) the
boundaries of Doncaster Borough and also transactions which have occurred since
January 2014. Please note the average sizes given reflect the approximate net
sales area, as defined by the RICS Property Measurement 1st Edition:
3.3 For ease of reference we have presented the evidence in postcode areas. It is
acknowledged that within postcode areas there will be fluctuations in values
achievable, which has been taken into consideration in our assessment.
DN1
3.4 The comprises of the central area of Doncaster town plus an area to the north,
broadly covering dwellings around the A18 to the south of the town centre, up to
the A19 / A630 to the north.
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3.5 In terms of residential values, at the current time the average house value within
DH1 for both new build and second hand sales equates to £95,326 (data taken
from Zoopla.co.uk). This is a slight fall of circa -0.74% during the last 12 months.
3.6 However, the general average can be a little misleading as it depends on that house
types are available in a location (if there is a high proportion of terraced houses, for
example, this can artificially decrease the average figure). In this respect, it is also
useful to look at the average values of each particular house type (for both new
build and secondary homes). In DN1 these are currently showing (data from
Zoopla.co.uk) the following averages:
Detached - £285,398 (£1,830 per sq m)
Semi-detached - £148,392 (£1,346 per sq m)
Terrace - £83,663 (£1,195 per sq m)
Flats - £88,934
3.7 In DN1 we note new build house sales achieved at the following:
- Muse Developments, The Gables: close to Doncaster town centre. Modern
design 1, 2 and 3 bed housing. 6 x 1/2 bed semi-detached houses sold in 2014
and 2015, at an average of £1,780 per sq m. 35 x 1/2 bed terraced houses sold
between Apr 14 and Mar 16, achieving an average of circa £1,805 per sq m.
For the terraced houses, there was an average increase in price of circa 1.7%
between 2015 and 2016.
3.8 The Muse Developments scheme suggests that new build dwellings will command
a premium above the average for the locality (which includes second hand house
sales). For example, the average across DN1 for semi-detached houses currently
stands at £1,346 per sq m, compared with £1,780 per sq m achieved by Muse
Developments (uplift of circa 25%). Further the evidence also contradicts the
general trend of falling house values during the last 12 months, as in fact house
prices within the scheme have increased in 2016. However, it is acknowledged that
this is only one development, and could reflect the nature of the location, product
etc, rather than being a tangible sign of a general market trend.
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DN2
3.9 This broadly covers an area to the north east of Doncaster town centre up to
Edenthorpe, comprising houses around the A630, A18, Thorne Road, Barnby Dun
Road and Armthorpe Road.
3.10 The average house value within DN2 for both new build and second hand sales
equates to £122,666 (data taken from Zoopla.co.uk). This is a fall of circa -3.61%
during the last 12 months.
3.11 More specifically, the average values for each house type in DN2 are currently
showing the following (data from Zoopla.co.uk):
Detached - £192,332 (£1,453 per sq m)
Semi-detached - £120,991 (£1,335 per sq m)
Terrace - £101,160 (£1,055 per sq m)
Flats - £105,381 (£1,733 per sq m)
3.12 In DN2 we note new build house sales achieved at the following:
- Johal Homes, Golden Fleece Court: small scheme located in the Wheatley
Hills area of Doncaster, located within an ex-Council owned estate. 7 x 3 bed
detached houses sold in 2014 and 2015, at an average of £1,422 per sq m.
3.13 Given the limited data in this postcode area it is difficult to draw any firm conclusions
in terms of average prices achieved.
DN3
3.14 This broadly covers a large area to the north east and east of Doncaster town
centre, and includes part of the M18 corridor, Armthorpe, Branton, Edenthorpe, Kirk
Sandall and Barnby Dun.
3.15 The average house value within DN3 for both new build and second hand sales
equates to £147,284 (data taken from Zoopla.co.uk). This is a fall of circa -3.49%
during the last 12 months.
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3.16 More specifically, the average values for each house type in DN3 are currently
showing the following (data from Zoopla.co.uk):
Detached - £195,641 (£1,744 per sq m)
Semi-detached - £122,001 (£1,410 per sq m)
Terrace - £107,939 (£1,335 per sq m)
3.17 In DN3 we note new build house sales achieved at the following:
- Harron Homes, Beaumont Gardens: located in Edenthorpe, comprising
mainly detached 2 storey houses. Between April 2014 and Feb 2016 47 x 4 bed
detached houses sold, at an average of £2,052 per sq m. There was an
average increase in price of circa 2.6% between 2015 and 2016 (although the
data only includes a small number of sales in 2016).
3.18 In terms of houses built post 2000 and sold after Apr 2014, and have identified 59
x 3, 4 and 5 bed detached houses, with an average price achieved of £1,733 per
sq m, 28 x 2, 3 and 4 bed semi-detached houses, which since Apr 2014 have sold
at an average of £1,535 per sq m, as well as 45 x 2, 3 and 4 bed terraced houses,
which since Apr 2014 have sold at an average of £1,456 per sq m.
3.19 The Harron Homes scheme therefore suggests that new build schemes will
command a premium above the average for the locality (which includes second
hand house sales). Further the evidence also contradicts the general trend of falling
house values during the last 12 months, as in fact house prices within the scheme
have increased in 2016. However, it is acknowledged that this is only one
development, and could reflect the nature of the location, product etc, rather than
being a tangible sign of a general market trend.
DN4
3.20 This broadly covers a large area to the south of Doncaster town centre, and
includes Warmsworth, dwellings around the A1 (M), A630 and A6182 (Balby Carr),
the Lakeside Shopping Outlet and housing along the A638 corridor to the south
east of Doncaster.
3.21 The average house value within DN4 for both new build and second hand sales
equates to £146,629 (data taken from Zoopla.co.uk). This is a fall of circa -2.75%
during the last 12 months.
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3.22 More specifically, the average values for each house type in DN4 are currently
showing the following (data from Zoopla.co.uk):
Detached - £229,939 (£1,755 per sq m)
Semi-detached - £125,119 (£1,496 per sq m)
Terrace - £87,742 (£1,130 per sq m)
3.23 In DN4 we note new build house sales achieved at the following:
- Keepmoat Homes, Dominion: located in Balby, close to Junction 3 of the M18.
Comprising a mix of detached, semi-detached and terraced houses. Between
June 2014 and Feb 2016 9 x 3 bed detached houses sold, at an average of
£1,898 per sq m. Between Dec 2014 and Mar 2016 41 x 2, 3 and 4 bed semi-
detached houses sold, at an average of £1,735 per sq m. Between June 2014
and Jan 2016 16 x 2 and 3 bed terraced houses sold, at an average of £1,819
per sq m.
- Strata Homes, Dominion: adjacent to the Keepmoat housing detailed above,
forming part of the same scheme. Between Dec 2014 and Jan 2016 21 x 4 bed
2 storey detached houses sold, at an average of £1,992 per sq m. Between
Aug 2014 and Apr 2016 4 bed 3 storey semi-detached houses sold, at an
average of £1,550 per sq m (3 storey houses command a lower rate per sq m
than 2 storey equivalents).
- Persimmon Homes, Warren Park: located in Bessacar. Between May 2015
and Mar 2016 22 x 3, 4 and 5 bed detached houses sold, at an average of
£2,216 per sq m. Between Jun 2015 and Dec 2015 13 x 2, 3 and 4 bed semi-
detached houses sold, at an average of £1,993 per sq m. In Dec 2015 7 x 2
bed terraced houses sold, at an average of £2,000 per sq m.
- David Wilson Homes, Serenity: located at Lakeside to the south east of
Doncaster town centre. Between Apr 2014 and Mar 2016 12 x 3, 4 and 5 bed
detached houses sold, at an average of £2,166 per sq m. Between May 2014
and Feb 2016 22 x 3 bed semi-detached houses sold, at an average of £2,141
per sq m. Between Apr 2014 and Mar 2016 18 x 3 bed terraced houses sold,
at an average of £1,911 per sq m.
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- Lovell Homes, Lincoln Homes: located at Lakeside, adjacent to the David
Wilson Homes scheme detailed above. Between Apr 2014 and Mar 2016 6 x 3
bed detached houses sold, at an average of £1,578 per sq m. Between Apr
2014 and Mar 2016 23 x 2 and 3 bed semi-detached houses sold, at an average
of £1,497 per sq m. Between Apr 2014 and Aug 2015 8 x 2 bed terraced houses
sold, at an average of £1,707 per sq m.
3.24 The Balby and Lakeside developments detailed above highlight that different values
can be achieved in neighbouring locations due to the quality / nature of the housing
product being offered.
3.25 In terms of houses built post 2000 and sold after Apr 2014, and have identified 73
x 3, 4 and 5 bed detached houses, with an average price achieved of £1,856 per
sq m, 30 x 2, 3 and 4 bed semi-detached houses, which since Apr 2014 have sold
at an average of £1,572 per sq m, as well as 61 x 2, 3 and 4 bed terraced houses,
which since Apr 2014 have sold at an average of £1,420 per sq m.
DN5
3.26 This covers a wide geographical area to the north, north-west and west of
Doncaster Town, and includes (amongst other settlements) Sprotbrough,
Barnburgh, Hooton Pagnell, Marr, Bentley, Toll Bar and Arksey. The main routes
through the area include the A1 (M), A625, A19 and A638 York Road.
3.27 The average house value within DN5 for both new build and second hand sales
equates to £141,465 (data taken from Zoopla.co.uk). This is a slight fall of circa -
0.79% during the last 12 months.
3.28 More specifically, the average values for each house type in DN5 are currently
showing the following (data from Zoopla.co.uk):
Detached - £241,565 (£1,884 per sq m)
Semi-detached - £121,850 (£1,529 per sq m)
Terrace - £86,724 (£1,152 per sq m)
3.29 In DN5 we note new build house sales achieved at the following:
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- Keepmoat Homes, Evergreen: located in Bentley, close to Junction 3 of the
M18. Comprising a mix of 3 and 4 bedroom dwellings. Between June 2014 and
Mar 2016 4 x 3 and 4 bed detached houses sold, at an average of £1,348 per
sq m. Between Jul 2014 and Mar 2016 26 x 3 and 4 bed semi-detached houses
sold, at an average of £1,278 per sq m. It is noted that houses prices grew by
circa 4% from 2015 to 2016. Between May 2014 and Jan 2016 24 x 3 bed
terraced houses sold, at an average of £1,316 per sq m.
3.30 In terms of houses built post 2000 and sold after Apr 2014, and have identified 12
x 3, 4 and 5 bed detached houses, with an average price achieved of £2,020 per
sq m, 7 x 2, 3 and 4 bed semi-detached houses, which since Apr 2014 have sold
at an average of £1,499 per sq m, as well as 21 x 2, 3 and 4 bed terraced houses,
which since Apr 2014 have sold at an average of £1,642 per sq m.
DN6
3.31 This covers a wide geographical area to the north of Doncaster Town, mainly along
the A1, A638 and A19 corridors. This area includes (amongst other settlements)
Norton, Askern, Carcroft, Adwick le Street and Moss.
3.32 Average house values in DN6 for new build and second hand sales equates to
£125,016 (data Zoopla.co.uk), a fall of circa -2.34% during the last 12 months. More
specifically, the average values for each house type in DN6 are currently showing
the following (data from Zoopla.co.uk):
Detached - £221,415 (£1,658 per sq m)
Semi-detached - £104,196 (£1,302 per sq m)
Terrace - £76,864 (£990 per sq m)
3.33 Since 2014, new build house sales are limited in DN6 and as we such we have
been unable to identify any large estates implemented by national / regional
housebuilders. We have extended our research to include houses built post 2000
and sold after Apr 2014, and have identified 16 x 3, 4 and 5 bed detached houses,
with an average price achieved of £1,505 per sq m, as well as 6 x 2, 3 and 4 bed
terraced houses, which since Apr 2014 have sold at an average of £1,479 per sq
m. Please note, as these house sales are older and include second-hand sales it
is assumed contemporary, brand new homes would command a premium above
these averages.
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DN7
3.34 This covers an area to the north east of Doncaster Town, which includes part of the
M18 and M180 corridors. This area includes (amongst other settlements) Hatfield,
Stainforth and Fishlake.
3.35 The average house value within DN7 for both new build and second hand sales
equates to £130,411 (data taken from Zoopla.co.uk). This is a fall of circa -1.56%
during the last 12 months.
3.36 More specifically, the average values for each house type in DN7 are currently
showing the following (data from Zoopla.co.uk):
Detached - £190,567 (£1,529 per sq m)
Semi-detached - £105,202 (£1,249 per sq m)
Terrace - £82,993 (£1,249 per sq m)
3.37 Since 2014, new build house sales are limited in DN7 and as we such we have
been unable to identify any large estates implemented by national / regional
housebuilders. We have subsequently extended our research to include houses
built post 2000 and sold after Jan 2014, and have identified 31 x 3, 4 and 5 bed
detached houses, with an average price achieved of £1,575 per sq m, as well as
13 x 2, 3 and 4 bed terraced houses, which since Feb 2014 have sold at an average
of £1,405 per sq m. Please note, as these house sales are older and include
second-hand sales it is assumed contemporary, brand new homes would command
a premium above these averages.
DN8
3.38 This covers an area immediately to the north east of DN7, and also includes part of
the M18 and M180 corridors. This area includes (amongst other settlements)
Moorends, Thorne and Sandtoft.
3.39 The average house value within DN8 for both new build and second hand sales
equates to £111,020 (data taken from Zoopla.co.uk). This is a fall of circa -1.83%
during the last 12 months.
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3.40 More specifically, the average values for each house type in DN8 are currently
showing the following (data from Zoopla.co.uk):
Detached - £165,592 (£1,410 per sq m)
Semi-detached - £95,209 (£1,141per sq m)
Terrace - £83,893 (£1,033 per sq m)
3.41 Since 2014, new build house sales are limited in DN8 and as we such we have
been unable to identify any large estates implemented by national / regional
housebuilders. We have subsequently extended our research to include houses
built post 2000 and sold after Jan 2014, and have identified 17 x 3, 4 and 5 bed
detached houses, with an average price achieved of £1,611 per sq m, as well as
10 x 2 and 3 bed terraced houses, which since Jul 2014 have sold at an average
of £1,459 per sq m. Please note, as these house sales are older and include
second-hand sales it is assumed contemporary, brand new homes would
command a premium above these averages.
DN9
3.42 This covers a large geographical area located to the east and south of the M18 and
M180 corridors. This area includes (amongst other settlements) Finningley, Wroot,
Haxey, Epworth, Belton and Owston Ferry.
3.43 The average house value within DN9 for both new build and second hand sales
equates to £207,027(data taken from Zoopla.co.uk). This is a fall of circa -2.26%
during the last 12 months.
3.44 More specifically, the average values for each house type in DN9 are currently
showing the following (data from Zoopla.co.uk):
Detached - £243,271 (£1,755 per sq m)
Semi-detached - £141,762 (£1,550per sq m)
Terrace - £115,010 (£1,346 per sq m)
3.45 In DN9 we note new build house sales achieved at the following:
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- David Wilson Homes, Pembridge Park: located in Auckley. Comprising a mix
of 3 and 4 bedroom dwellings. Between Apr 2014 and Mar 2016 58 x 3 and 4
bed detached houses sold, at an average of £2,129 per sq m. From 2015 and
2016 the house values have remained broadly static. Between Dec 2014 and
Dec 2015 8 x 3 bed semi-detached houses sold, at an average of £2,102 per
sq m. Between Dec 2014 and Jul 2015 5 x 2 and 3 bed terraced houses sold,
at an average of £2,095 per sq m.
- Taylor Wimpey Homes, Westlands: located in Auckley, adjacent to the David
Wilson Homes detailed above. Comprising a mix of 3, 4 and 5 bedroom
dwellings. Between Apr 2014 and Apr 2016 28 x 4 bed detached houses sold,
at an average of £1,929 per sq m. From 2015 and 2016 the house values have
remained broadly static. Between Apr 2014 and Mar 2016 28 x 3 bed semi-
detached houses sold, at an average of £1,747 per sq m.
3.46 In terms of houses built post 2000 and sold after Apr 2014, and have identified 85
x 3, 4 and 5 bed detached houses, with an average price achieved of £1,668 per
sq m, 4 x 3 and 4 bed semi-detached houses, which since Apr 2014 have sold at
an average of £1,532 per sq m, as well as 10 x 2 and 3 bed terraced houses, which
since Apr 2014 have sold at an average of £1,776 per sq m.
DN10
3.47 Located to the south east of Doncaster town centre, this area includes (amongst
other settlements) Bawtry, Austerfield, Gringley on the hill and Misterton. These
settlements are largely located along the A631, A614 and A638 trunk roads.
3.48 The average house value within DN10 for both new build and second hand sales
equates to £242,873 (data taken from Zoopla.co.uk). This is a fall of circa -1.14%
during the last 12 months.
3.49 More specifically, the average values for each house type in DN10 are currently
showing the following (data from Zoopla.co.uk):
Detached - £296,030 (£2,002 per sq m)
Semi-detached - £160,323 (£1,658 per sq m)
Terrace - £147,381 (£1,895 per sq m)
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3.50 Since 2014, new build house sales are limited in DN10 and as we such we have
been unable to identify any large estates implemented by national / regional
housebuilders. We have subsequently extended our research to include houses
built post 2000 and sold after Apr 2014, and have identified 41 x 3, 4 and 5 bed
detached houses, with an average price achieved of £1,846 per sq m, as well as
6 x 2, 3 and 4 bed terraced houses, which since Aug 2014 have sold at an average
of £1,846 per sq m. Please note, as these house sales are older and include
second-hand sales it is assumed contemporary, brand new homes would
command a premium above these averages.
DN11
3.51 Located to the south of Doncaster town centre, this area includes (amongst other
settlements) Tickhill, Loversall, Rossington and Harworth. The area is mainly
formed around the A1 (M) and M18 corridors.
3.52 The average house value within DN11 for both new build and second hand sales
equates to £155,252 (data taken from Zoopla.co.uk). This is a fall of circa -1.94%
during the last 12 months.
3.53 More specifically, the average values for each house type in DN11 are currently
showing the following (data from Zoopla.co.uk):
Detached - £235,254 (£1,948 per sq m)
Semi-detached - £118,447 (£1,421 per sq m)
Terrace - £193711 (£1,206 per sq m)
3.54 Since 2014, new build house sales are limited in DN11 and as we such we have
been unable to identify any large estates implemented by national / regional
housebuilders. We have subsequently extended our research to include houses
built post 2000 and sold after Apr 2014, and have identified 39 x 3, 4 and 5 bed
detached houses, with an average price achieved of £1,691 per sq m, 16 x 2, 3
and 4 bed semi-detached houses, which since Apr 2014 have sold at an average
of £1,596 per sq m, and 39 x 3, 4 and 5 bed detached houses, with an average
price achieved of £1,691 per sq m, 17 x 2, 3 and 4 bed terraced houses, which
since May 2014 have sold at an average of £1,464 per sq m. Please note, as these
house sales are older and include second-hand sales it is assumed contemporary,
brand new homes would command a premium above these averages.
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DN12
3.55 Located to the south west of Doncaster town centre, this area includes (amongst
other settlements) Conisbrough, Old Denaby and New Edlington. The area is
mainly served by the A630 and A1 (M).
3.56 The average house value within DN12 for both new build and second hand sales
equates to £106,462 (data taken from Zoopla.co.uk). This is a fall of circa -3.77%
during the last 12 months.
3.57 More specifically, the average values for each house type in DN12 are currently
showing the following (data from Zoopla.co.uk):
Detached - £185,365 (£1,496 per sq m)
Semi-detached - £98,707 (£1,216 per sq m)
Terrace - £75,291 (£936 per sq m)
3.58 In DN12 we note new build house sales achieved at the following:
- Keepmoat Homes, Yew Gardens: located in New Edlington. Between Dec
2014 and Jul 2015 2 x 3 bed detached houses sold, at an average of £1,605
per sq m. Between Apr 2014 and Mar 2016 29 x 2 and 3 bed semi-detached
houses sold, at an average of £1,469 per sq m. From 2015 and 2016 the house
values increased by circa 2%. Between Aug 2014 and Nov 2015 10 x 2 and 3
bed terraced houses sold, at an average of £1,366 per sq m.
3.59 In terms of houses built post 2000 and sold after Apr 2014, and have identified 7 x
3 and 4 bed detached houses, with an average price achieved of £1,725 per sq m,
10 x 2 and 3 bed semi-detached houses, which since Apr 2014 have sold at an
average of £1,481 per sq m, as well as 20 x 2, 3 and 4 bed terraced houses, which
since Apr 2014 have sold at an average of £1,331 per sq m.
Summary
3.60 To aid analysis, below we have summarised the average house prices achieved in
each postcode since April 2014, splitting the data into houses built between 2000
and 2009, and houses built post 2009.
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Table 1 – Postcode house price averages
Pcde 2000-2009 Sample Post 2009 Sample
DN1 £ - 0 £ 1,802 42
DN2 £ - 0 £ 1,530 13
DN3 £ 1,597 132 £ 1,992 152
DN4 £ 1,642 164 £ 1,931 276
DN5 £ 1,731 40 £ 1,615 97
DN6 £ 1,511 26 £ 1,759 3
DN7 £ 1,477 53 £ 1,526 25
DN8 £ 1,529 30 £ 1,202 13
DN9 £ 1,667 100 £ 1,950 177
DN10 £ 1,846 47 £ 1,807 41
DN11 £ 1,595 76 £ 1,781 49
DN12 £ 1,417 38 £ 1,511 72
3.61 We have also shown the average house prices achieved for various settlements
across Doncaster Borough. Again we have differentiated between houses built
between 2000 and 2009 and the prices achieved for houses build post 2009. The
data is summarised below in Table 2.
Table 2 – Settlement house price averages
Settlement 2000 to
2009 Sample Post 2009 Sample
Adwick & Woodlands £ 1,226 4 £ - 0
Thorne-Moorends £ 1,529 30 £ 1,202 13
Bentley £ 1,492 8 £ 1,305 61
Edlington £ 1,444 10 £ 1,452 45
Rossington £ 1,627 45 £ 1,480 6
Askern £ 1,538 8 £ 1,432 1
Carcroft & Skellow £ 1,517 5 £ - 0
Barnby Dun & Kirk Sandall £ 1,620 31 £ 1,293 11
Mexborough £ 1,414 10 £ 1,516 92
Stainforth & Hatfield £ 1,477 53 £ 1,526 25
Conisbrough & Denaby £ 1,500 24 £ 1,610 27
Armthorpe £ 1,548 88 £ 1,653 11
Scawsby / Scawthorpe £ 1,570 12 £ 1,685 18
Lakeside / edge of Doncaster £ 1,593 12 £ 1,887 123
Balby / SW Doncaster £ 1,596 102 £ 1,912 103
Auckley & Hayfield Green & Finningley £ 1,639 30 £ 2,001 152
Edenthorpe £ 1,372 3 £ 2,057 48
Bessacarr / SE Doncaster £ 1,869 130 £ 2,083 51
Tickhill £ 1,991 4 £ 2,150 2
Sprotbrough / Barnburgh & Harlington £ 2,001 17 £ 2,597 18
Bawtry £ 2,007 31 £ 2,602 1
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3.62 Based on all of the above considerations we have subsequently allocated the
following settlements into the value bands, as follows:
Table 3 – Settlement value banding
Value Band
Postcode (broad)
Settlements
High DN9 3 Auckley & Hayfield Green
DN9 3 Finningley
DN10 6 Bawtry
DN11 9 Tickhill
DN5 7 Sprotbrough
DN5 7 Barnburgh & Harlington
Medium DN5 8 Scawsby / Scawthorpe
DN4 7 Bessacarr / SE Doncaster
S64 0 Mexborough
DN7 6 Hatfield
DN7 5 Stainforth
DN3 3 Armthorpe
DN3 2 Edenthorpe
DN3 1 Barnby Dun / Kirk Sandall
DN6 0 Askern
DN6 8 Carcroft & Skellow
DN4 / DN1 Lakeside / edge of Doncaster
DN4 / DN1 Balby / SW Doncaster
Low / medium DN12 2 Conisbrough & Denaby
Low DN5 0 Bentley
DN8 4 / DN8 5 Thorne-Moorends
DN11 0 Rossington
S64 0 / DN6 7 Adwick & Woodlands
DN12 1 Edlington
4.0 Conclusions
4.1 The average postcode analysis (data derived from Zoopla), which incorporates all
house types and ages of construction, shows a general trend that house prices
have fallen slightly during the last 12 months.
4.2 However, it is unclear whether this is a long term trend, or whether this is temporary
(reflecting external factors, such as the EU referendum decision). There are a
number of examples of new build schemes where house values have in fact
increased during the last 12 months, which suggests the data shown from Zoopla
may be misleading and may not necessarily apply to new build housing.
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4.3 Furthermore, the general consensus in the market place is that there remains a
high level of demand for housing across the country, and with the continuation of
Government-led initiatives such as ‘Help to Buy’ and the introduction of Starter
Homes, it remains likely that new build houses will, generally speaking, continue to
attract strong levels of demand in the short to medium (which will ultimately serve
to underpin values).
4.4 In this respect, and whilst we have been sensitive to the indicators which point to a
slight slowing in house values during the last 12 months, we do not believe it is
appropriate to adopt an overly negative approach in setting house prices within this
study. In our view, new build housing will continue to attract strong levels of
demand, aided by Government led initiatives.
4.5 In terms of setting appropriate values for testing in the viability study, based on our
experience and having discussed this at the Stakeholder workshop, we have
adopted the approach of setting a single average figure for 3 categories of value
areas, being: low, medium and high.
4.6 The average figure for each value area is based on the analysis of the data
highlighted above, being an average across all house types (i.e. detached, semi-
detached, terraced). The figures are taken within the context of the local market.
4.7 The broad average values range for each area as follows:
Low:
Houses in low value areas are defined as generating average sales values for new
build dwellings in the region of £1,500 per sq m.
Medium:
Houses in medium value areas are defined as generating average sales values for
new build dwellings in the region of £1,750 to £2,000 per sq m.
High:
Houses in high value areas are defined as generating average sales values for new
build dwellings in the region of £2,250 per sq m (or higher).
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4.8 Based on these broad bandings, for the purposes of the viability testing, we have
subsequently adopted the following average sales values for each area:
Area Average Sales value (£ per sq m)
Low value area £1,500 Medium value area £1,750 High value area £2,250
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Appendix 2 Threshold Land Value Assessment
105
APPENDIX 2
THRESHOLD LAND VALUE ASSESSMENT
1.0 Introduction
1.1 This section focuses on Threshold Land Values (“TLVs”), and includes a definition
of the concept, a review of the relevant viability guidance and the approach adopted
for the purposes of this study.
1.2 Land value is a key component of a development appraisal, albeit it can often be
the ‘outcome’ of the appraisal rather than being a fixed figure (hence why appraisals
are often referred to as being ‘residual’, because once all the inputs are included
the ‘residue’, if there is any, is used as the sum which a developer could pay for the
site).
1.3 However, the ‘residue’ from the appraisal (as a land value) does not always meet
the expectations of the landowner. If the developer is only able to pay a significantly
reduced sum below the landowner’s expectations then the outcome is fairly straight
forward; the land would not be sold for development. In undertaking a viability
assessment a minimum land value is therefore identified (sometimes referred to as
the “benchmark” or “threshold” land value - TLV).
1.4 This slightly changes the focus of a development appraisal when used for testing
viability, because rather than the land value being freely subject to change there
becomes a minimum figure below which a landowner would not release the land
for development. If this minimum figure is reached, other inputs within the appraisal
would need to be subject to change to ensure viability. As the majority of
development costs (like build costs, professional fees, funding etc) are relatively
fixed the only ‘flex’ could therefore be in the developer’s profit or the Council’s
policy. Paragraph 173 of the National Planning Policy Framework (“NPPF”)
indicates that the Council’s policy should be at a level which provides the developer
and landowner with a competitive return, which is often taken to mean that the
Council’s policies should be an input subject to change if the minimum land value
has not been met but the Council’s full policies have been achieved.
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2.0 Viability Guidance
2.1 Identifying the level of an appropriate TLV is itself not straight forward. Surveyors
are now assisted by two relatively recent publications, although the guidance
between each is somewhat contradictory. We have commented on each publication
as follows:
“Financial viability in planning” August 2012 by the Royal Institution of
Chartered Surveyors (RICS):
Para 2.5.2, Box 10, “…nature of the applicant should normally be disregarded
as should the benefits or dis-benefits that are unique to the applicant.”
2.2 Thus, appraisals should be done assuming hypothetical, typical landowners and
developers and the views and aspirations of the actual owner are not relevant if
these views differ from general market practice.
Para 2.3.2, Box 7, “Site value should equate to the market value subject to the
following assumption: that the value has regard to the development plan
policies and all other material planning considerations and disregards that
which is contrary to the development plan.”
2.3 As indicated above, this refers to the site value as usually being assessed by means
of a residual development appraisal. However, the suggestion seems to be that
planning policies should be fixed and land value subject to change (which
contradicts the view of the landowner having a minimum land value below which
they would sell).
Para 2.1.2 “It follows, for example, that the land value is flexible and not a fixed
figure to the extent that Site Value has to be determined as part of the viability
assessment.”
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2.4 This appears to support the above view that it is the Council’s policy which drives
the land value, not the other way round. However, the RICS document does
acknowledge that the flexibility in land value cannot result in the value going below
the Current Use Value (“CUV”), stating:
Para 3.4.4 “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.”
2.5 This appears to support the view of setting a TLV for development appraisals, which
is to somehow be linked to the CUV However, no guidance is given as to how to
determine the link between the CUV and the TLV.
2.6 Furthermore, in particular no guidance is given to assessing greenfield land, where
the CUV may only be £12,500 - £25,000 per Ha and clearly a TLV only slightly
above the CUV would not represent a sufficient incentive for a landowner to sell for
development.
“Viability Testing Local Plans” June 2012 by the Local Housing Delivery
Group (“The Harman Review”).
Pg 29 “We recommend that the Threshold Land Value is based on a premium
over current use values and credible alternative use value (noting the
exceptions below)”
2.7 This therefore contradicts the guidance provided by the RICS, where adopting a
percentage uplift above the CUV is not recommended.
2.8 One of the exceptions referred to relates to “non-urban” and “greenfield” sites.
Pg 30 “ It is widely recognized that this approach [i.e. a percentage increase
over CUV] can be less straight forward for non urban sites or urban extensions,
where land owners are rarely forced or distressed sellers…This is particularly
the case in relation to large greenfield sites…Accordingly, the uplift to current
use value sought by the landowners will invariably be significantly higher than
in an urban context and requires very careful consideration”.
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2.9 This does not mean that an assessment of the CUV has no part to play in the
process of assessing greenfield sites. A typical landowner will still want to know
what the value of his/her site is without the planning permission applied for, and
then judge by how much, if at all, the CUV increases when planning consent is
granted. The difference is that, for urban brownfield sites a premium uplift of circa
25 – 50% of the CUV may be deemed sufficient to incentivise a landowner to sell
(e.g. if the CUV is £200,000 per Ha, applying a 50% uplift would mean a TLV of
£300,000 per Ha, which would be attractive to a landowner). For a greenfield site,
if the CUV is only say £10,000 per Ha then a 50% uplift (i.e. a TLV of £15,000 per
Ha) would clearly not incentivise a landowner to release the land for development.
In reality, the ‘uplift’ would need to be more like 15 – 25 times (or more) the CUV.
2.10 In terms of how to evidence the approach to greenfield sites the document goes on
to say:
Pg 30 “…local sources should be used to provide a view on market values (the
‘going rate’), as a means of giving a further sense check on the outcome of
the current use plus premium calculation”.
Pg 30 “…for sites of this nature [i.e. greenfield], it will be necessary to make
greater use of benchmarks, taking into account of local partner views on
market data and information on typical minimum price provisions used within
developer / site promoter agreements for sites of this nature”.
2.11 This therefore seems to advocate using evidence of TLVs identified as part of the
viability process, as well as using market transactions as a general ‘sense check’.
However, there are limitations of assessing land sales (please see below section
2.3 DVS approach: evidence types identified).
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3.0 Methodology
3.1 In summary, a TLV can therefore be regarded as being effectively the average price
that an average developer / house builder would be willing to pay for a site, being
at a level which would incentivize an average landowner to release the site for
development. A TLV does not therefore seek to reflect excessive demands
from unreasonable parties, but instead looks to reflect a reasonable price for
all parties concerned. It therefore follows that the price paid for a specific site
by a specific developer may not necessarily be appropriate as the TLV when
assessing viability, because the price paid may be considered to be too low
or excessive when compared with the wider market.
3.2 The valuation process to identify this ‘reasonable’ price involves the surveyor
judging where the value of the site would be if the respective costs of applying all
the Council’s existing and emerging planning policies and undertaking abnormal
works (if applicable) were fully reflected. This is then viewed alongside the price at
which a reasonable, hypothetical, commercially-minded landowner would dispose
of the land having regard to the site’s Current Use Value (CUV) or any Alternative
Use Value (AUV), should one be available.
3.3 Settling on this ‘reasonable’ land value in an appraisal is not therefore
straightforward and the guidance is contradictory and can be interpreted in different
ways. Landowners naturally want as high a price as they can achieve and some of
them are not prepared to recognise how the impact of the cost of planning gain and
abnormals drives down net land values materially.
3.4 As indicated above, to complicate matters the approach to assessing an
appropriate TLV for greenfield sites is also slightly different to brownfield land,
because the ‘premium uplift’ on a greenfield site should be significantly higher than
that of brownfield land.
3.5 Furthermore, abnormal costs should also be a key consideration when assessing
an appropriate TLV for a particular site. If there are 2 identical sites next door to
one another, but one has significant abnormal works and the other doesn’t, then
the TLV for the site affected by the abnormal works should have a lower TLV than
the unaffected site.
3.6 In accordance with the Harman Review, we concur that market transactions alone
do not provide an adequate evidence base on which to consider TLVs.
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3.7 When assessing TLVs we look to assess a variety of evidence sources, including:
TLVs submitted by developers / house builders in their own viability
appraisals.
TLVs as agreed with developers / house builders as part of negotiations
over individual viability appraisals.
TLVs determined as part of the planning appeal decisions.
TLVs assessed for the purposes of area wide studies.
3.8 The above therefore provides direct evidence sources on actual TLVs, and
therefore it is easier to make a direct comparison. The Harman Guidance suggests
this should be the ‘first step’ when looking to identify appropriate TLVs.
3.9 The ‘second step’ is to then consider market transactions / land sales. However,
assessing actual land sales for the purposes of identifying a TLV is not straight
forward, as the price someone is willing to pay for a piece of development land (and
indeed accept for a piece of development land) is subject to many factors, which
includes:
- The type of development that could be brought forward.
- The gross to net ratio (it may be that a large section of the site is constrained
and cannot be developed).
- The potential density any of proposed scheme.
- Whether any third parties benefit from a ransom position preventing access
to the site.
- Whether there are any title constraints.
- The abnormal costs associated with developing the site (i.e. any untypical
cost, such as deep pile foundations to mitigate ground concerns, flooding
mitigation works etc).
- The planning policies that relate to a specific type of scheme.
- Whether a purchaser benefits from synergistic value (formerly known as
marriage value) with any neighbouring land they already own or will own in
the future.
- Whether a vendor is under financial pressure to sell.
- Whether a house-builder is keen to have a presence in a particular location
etc etc.
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3.10 There are therefore a number of factors which impact upon the price someone is
willing to pay for development land, because ultimately each development site is
unique. For example, you could have 2 sites next to each other sold at the same
time, each being 5 Ha and the same shape. However, one may have significant
flooding issues and a poor access route, whereas the other may have no concerns.
The price paid for the land affected by ‘abnormal’ development costs (i.e. in this
case flooding and a poor access route) would therefore most likely be significantly
less than the unaffected site. The reasons for the difference in value, though, would
not be identifiable by simply looking at the price paid for the land on a ‘per Ha’ basis.
3.11 This means it is extremely difficult to compare two land transactions because in
reality only some of the factors outlined above (which is not an exhaustive list) will
be known to the analysing surveyor.
3.12 In this respect, land transactions are useful in providing a ‘sense check’ but
they should not be regarded as providing a definitive view on threshold land
values, particularly on a ‘price per Ha’ basis, because in most cases the full
details of the transaction (and the factors which impact upon value) will not
be known. Land sales should be therefore considered after the other sources
of evidence identified, and provide a ‘sense check’ only.
3.13 Please note, when assessing the evidence and considering appropriate TLVs we
have looked to distinguish between greenfield and brownfield sites, for the reasons
outlined above in 2.9 onwards).
4.0 Evidence – greenfield
4.1 A ‘greenfield’ site is considered to be a site which has not previously been
developed before and essentially comprises grassland or agricultural land.
4.2 In terms of direct TLV evidence (not transactional evidence), we have identified
the following TLVs for greenfield sites, identified from viability appraisals received
from applicants. For the purposes of this exercise we have looked at TLVs for
greenfield sites across the North East of England, Yorkshire and the East Midlands.
Whilst a large geographical area this gives a good indication of how TLVs for
greenfield sites remain relatively consistent across regions (please note for
confidentiality reasons we are unable to provide the full details of each case):
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Medium value area near to Leeds, West Yorkshire – greenfield site, net area
6.47 Ha, proposal for 181 dwellings. Abnormals circa £333,500 per net Ha.
Average house price £1,888 per sq m. January 14 a regional developer
submitted a viability appraisal, indicating a TLV equivalent to £680,000 per
net Ha (£573,000 per gross Ha).
Medium value area North Yorkshire, commutable to Leeds – greenfield site,
net area 8.07 Ha, proposal for 179 dwellings. Abnormals circa £415,000 per
net Ha. Average house price £1,977 per sq m April 14 a national house
builder submitted a viability appraisal, indicating a TLV equivalent to
£494,000 per net Ha (£369,500 per gross Ha).
Low value area South Yorkshire – greenfield site, net area 2.76 Ha,
proposal for 97 dwellings. Abnormals circa £54,000 per net Ha. Average
house price £1,391 per sq m. June 14 a national house builder submitted a
viability appraisal, indicating a TLV equivalent to £217,500 per net Ha
(£199,000 per gross Ha).
Medium value area North Yorkshire, commutable to Leeds – greenfield site,
net area 3.57 Ha, proposal for 103 dwellings. Abnormals circa £408,000 per
net Ha. Average house price £1,842 per sq m. June 14 a regional house
builder submitted a viability appraisal, indicating a TLV equivalent to
£284,000 per net Ha (£247,000 per gross Ha).
Medium value area West Yorkshire – greenfield site, net area 9.19 Ha,
proposal for 166 dwellings. Abnormals circa £590,500 per net Ha. Average
house price £1,923 per sq m Sept 14 a national house builder submitted a
viability appraisal, indicating a TLV equivalent to £631,000 per net Ha
(£474,500 per gross Ha).
Low value area West Yorkshire – greenfield site, net area 8.47 Ha, proposal
for 283 dwellings. Abnormals circa £173,000 per net Ha. Average house
price £1,587 per sq m. Nov 14 a national house builder submitted a viability
appraisal, indicating a TLV equivalent to £294,000 per net Ha (£267,000 per
gross Ha).
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Medium value in West Yorkshire - greenfield site, net area 16.08 Ha,
proposal for 560 dwellings. Abnormals circa £148,000 per net Ha. Average
house price £2,099 per sq m. April 15 a national firm of chartered surveyors
submitted a viability appraisal, indicating a TLV equivalent to £618,000 per
net Ha (£390,000 per gross Ha).
Medium value in West Yorkshire - greenfield site, net area 1.27 Ha, proposal
for 42 dwellings. Abnormals circa £709,000 per net Ha. Average house price
£2,152 per sq m. Mar 15 a national house builder submitted a viability
appraisal, indicating a TLV equivalent to £363,000 per net Ha (£310,500 per
gross Ha).
High value area in West Yorkshire – greenfield site, net area 3.50 Ha,
proposal for 84 dwellings. Abnormals circa £217,500 per gross Ha. Average
house price circa £1,958 per sq m (please note DVS argued this should
have been in excess of £2,500 per sq m given the high value area). May 15
a national house builder submitted a viability appraisal, indicating a TLV
equivalent to £445,000 per gross Ha (net size unknown).
Low value area in Lincolnshire – greenfield site, net area 3.20 Ha, proposal
for 108 dwellings. Abnormals circa £506,500 per net Ha. Average house
price £1,629 per sq m. June 15 a regional house builder submitted a viability
appraisal, indicating a TLV equivalent to £309,000 per net Ha (£277,000 per
gross Ha).
Medium value area in West Yorkshire – greenfield site, net area 2.16 Ha,
proposal for 66 dwellings. Abnormals circa £414,503 per net Ha. Average
house price £1,920 per sq m. Oct 15 a regional planning consultant
submitted a viability appraisal, indicating a TLV equivalent to £531,265 per
net Ha (£466,604 per gross Ha).
Medium value area in Derbyshire – greenfield site, net area 7.53 Ha,
proposal for 201 dwellings. Abnormals circa £70,279 per net Ha. Average
house price £1,880 per sq m. Dec 15 a national surveying firm submitted a
viability appraisal, indicating a TLV equivalent to £420,070 per net Ha
(£302,000 per gross Ha).
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Medium value area in Lincolnshire – greenfield site, net area 4.46 Ha,
proposal for 137 dwellings. Abnormals circa £78,998 per net Ha. Average
house price £2,033 per sq m. Dec 15 a national surveying firm submitted a
viability appraisal, indicating a TLV equivalent to £262,838 per net Ha
(£235,000 per gross Ha).
Medium value area in Nottinghamshire – greenfield site, net area 2.31 Ha,
proposal for 91 dwellings. Abnormals nil. Average house price £1,939 per
sq m. Apr 16 a national housebuilder submitted a viability appraisal,
indicating a TLV equivalent to £363,237 per net Ha (£236,000 per gross
Ha).
Medium value area in North Yorkshire – greenfield site, net area 7.57 Ha,
proposal for 276 dwellings. Abnormals nil. Average house price £1,616 per
sq m. Apr 16 a planning consultant submitted a viability appraisal, indicating
a TLV equivalent to £535,573 per net Ha (£377,500 per gross Ha).
High value area in Derbyshire – greenfield site, gross site area 10.70 Ha,
proposal for 246 dwellings. Abnormals £500,854 per gross Ha. Average
house price £2,271 per sq m. Jun 16 a local surveying firm submitted a
viability appraisal, indicating a TLV equivalent to £430,319 per gross Ha.
Low value area in South Yorkshire – greenfield site, gross site area 2.48
Ha, proposal for 80 dwellings. Abnormals £40,376 per net Ha. Average
house price £1,597 per sq m. Jun 16 a local planning consultant submitted
a viability appraisal, indicating a TLV equivalent to £201,879 per net Ha
(£154,500 per gross Ha).
4.3 Based on the above sample of 17 identified TLVs the average equates to circa
£338,495 per gross Ha, ranging from £154,500 per gross Ha to £573,000 per gross
Ha.
4.4 More specifically, in the areas considered to be ‘low value’, the average across the
sample of TLVs equates to circa £224,000 per gross Ha. For the ‘medium value’
sites the average increases to £362,000 per gross Ha. The ‘high value’ site sample
is small and therefore is considered to be less reliable (albeit shows an average of
circa £437,500 per gross hectare).
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4.5 Although not a definitive source of information, this at least gives a general
indication of the levels of TLVs being applied by developers / house builders to
greenfield sites across the wider regions in viability appraisals (albeit with the
acknowledgement that these figures are naturally on the high side). It therefore
stands to reason that TLVs within an area such as Doncaster (not considered to be
vastly different in terms of the types of houses being provided and the values
achieved across Yorkshire, the North East and the East Midlands) should certainly
not exceed the upper end of this range.
4.6 In addition to the above we have also considered TLVs identified by private practice
chartered surveyors in CIL / general area wide studies undertaken on behalf of local
authorities. Again, we have considered these from a broader region, to include
Yorkshire and the East Midlands, as follows (please note some studies were not
explicit with regard to what they considered the appropriate TLV to be, and instead
simply indicated whether the residual land value return was broadly reasonable or
not – these have subsequently been excluded from the sample. Also, we have
limited the sample to reports published post 2014):
Sheffield City Council CIL Viability Study – undertaken by BNP Paribas,
dated Feb 2014. The report concludes “the approach of using current
use values is a more reliable indicator of viability than using market
values or prices paid for sites” and for greenfield sites adopts a TLV of
£247,000 per Ha.
Wakefield Metropolitan District Council CIL Viability Study – undertaken
by DTZ, dated Feb 2014. Adopts the following benchmark land values:
low value area £679,537 per net Ha, medium value area £834,000 per
net Ha and high value area £988,400 per net Ha. It is stressed that these
figures are based on net areas, therefore is difficult to compare with our
study which assumes gross areas. Also, DTZ do not differentiate
between greenfield or brownfield values.
Selby CIL Addendum Report – undertaken by Peter Brett Associates in
April 2014. The report doesn’t appear to distinguish between greenfield
and brownfield sites. For low value areas a TLV equivalent to £450,000
per net developable Ha (so likely to be sub £370,000 on a gross Ha
basis). For medium value areas this increases to £650,000 per net Ha
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(so again on a gross basis more likely to be £494,000 - £555,000 per
gross Ha). For high value areas this increases to £900,000 per net Ha
(so more like £740,000 - £800,000 on a gross basis per Ha).
Leicester City Council CIL Viability Study Update – undertaken by HDH
Planning in December 2014. For greenfield sites assumed a TLV range
of £280,000 per gross Ha to £310,000 per gross Ha.
Mansfield District Council Local Plan: Viability Assessment –
undertaken by DSP Planning and Development Viability Consultants,
dated Nov 2015. TLV range of £350,000 to £500,000 per Ha. However,
DSP do not differentiate between greenfield or brownfield values.
Calderdale Council Local Plan and CIL Viability Evidence – undertaken
by GVA, dated Oct 2015. Greenfield TLV of £383,005 per Ha.
Gedling Borough Council Local Plan Viability Assessment – undertaken
by NCS, dated Mar 2016. Greenfield TLV £786,238 per Ha.
4.7 Of the 7 studies referenced, the suggested TLV ranges from £247,000 per Ha up
to £988,400 per Ha (albeit at the high end of the range reflecting a net Ha and being
only applicable to a high value area). Given the broad range identified there is
therefore little discernible pattern on which to draw any firm conclusions.
4.8 That said, what is clear is that the studies agree that the best approach is to
consider the Current Use Value (“CUV”) of the land (which for greenfield is typically
an agricultural use) and then from this apply a level of premium to incentivize the
landowner to release the land from development. This, in line with the Harman
Review guidance, is deemed a more appropriate approach than basing TLV’s on
actual land transactions, due to the wide fluctuations that can occur in land deals
(transactional evidence is therefore deemed more appropriate to use as a sense
check). The major disagreement across the sample is therefore what the level of
premium should be above the CUV, which fluctuates significantly between the
studies.
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4.9 In conclusion, we would stress that each site should still be taken on its merits when
looking to identify a suitable TLV, as this will fluctuate on a site by site basis
depending on the abnormal costs of development, impact of Council policies etc.
However there are some broadly accepted ‘norms’ or range of norms.
4.10 It should also be noted that quantum is likely to play a role on larger schemes (i.e.
to reflect the fact a developer would effectively be buying in ‘bulk’, the TLV for large
sites (in particular strategic sites) should be discounted on a price per acre basis).
Furthermore, for the larger sites the developer / house builder is likely to draw down
the land as and when needed, which would have a positive impact on the finance
costs.
4.11 Having taken into account all of the above we are of the view that it is appropriate
to adopt a range of TLVs for the purposes of this report. In this case, we have
looked to apply a different range depending on whether the site is located within
what is perceived to be a low, medium or high value area.
4.12 In our analysis we have assumed a low value area supports values of £1,500 per
sq m, a medium value area values of £1,750 per sq m, and a high value area £2,250
per sq m.
4.13 Based on these adjusted definitions, and in light of the evidence identified we have
adopted the following TLVs for greenfield sites across Doncaster:
Area Definition (£ per sq m) TLV range (£ per gross Ha)
Low value area £1,500 £200,000 Medium value area £1,750 £270,000 High value area £2,250 £350,000
4.14 However, please note for significantly larger strategic sites, as indicated
above, we would expect a level of discount from the above figures to reflect
quantum.
4.15 On the basis that agricultural land typically attracts values in the region of £10,000
to £25,000 per Ha (and is less sensitive to location than other site types), the above
TLV range represents, broadly, an uplift in value of circa 15 to 20 times the current
use value of an assumed agricultural use. When considered in this context the
above TLV’s are considered to provide an attractive uplift in value for the
landowner.
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4.16 As a ‘sense check’ only we have also subsequently reviewed market transactions
to determine whether these suggested figures are appropriate, albeit
acknowledging that market transactions have their limitations when being assessed
in the context of benchmark land values, as per the comments above (see above
3.9 onwards).
4.17 We have identified the following sample of greenfield transactions which have taken
place after Jan 2014, for sites in excess of 0.25 Ha
Table 1 – Greenfield transactional evidence
Date
Address Price Gross (Ha)
£ per Ha
Jun-14 Athelstane Crescent, Edenthorpe DN3 £1,988,387 2.09 £951,381
Apr-15 Manor Farm, Bawtry Road, Bessacarr DN4 £3,800,000 6.02 £631,229
Jul-15 Land at Duftons Close, Conisbrough DN12 £95,000 0.47 £202,128
Jul-15 Land at Ridge Bank Lane, Woodlands DN6 £135,000 0.67 £201,493
Sep-15 Dixon Rd/Thompson Av, Edlington DN12 £600,000 2.47 £242,915
Nov-15 Land to rear 88 Thorne Rd, Edenthorpe DN3
£175,000 0.44 £579,545
Nov-15 Doncaster Rd, Denaby Main DN12 £2,352,000 6.75 £348,444
Dec-15 Land to west of Hurst Lane, Auckley DN9 £1,100,000 11.86 £92,749
Jan-16 Land at Chase Park, Woodlands DN6 £1,848,000 2.50 £739,200
Apr-16 Spa Terrace,Askern DN6 (UNSOLD at auction Apr 2016)
Ask.£110,000 0.40 £275,000
4.18 Please note, when researching greenfield sites we initially attempted to identify the
price paid by volume housebuilders for current ‘live’ housing schemes across
Doncaster Borough. However, this proved extremely difficult as often the price paid
was not available, or the deal was complicated (with phased payments over a
number of years, for example) to the extent where we were unable to identify a
single ‘rate per Hectare’ paid.
4.19 Of the 10 transactions identified, there is a price range of £92,749 to £951,381 per
gross Ha, with an average of £426,408 per gross Ha. This wide range highlights
the difficulties associated with assessing land transactions, as there is no
discernible pattern to the prices paid.
4.20 That said, the adopted TLV’s, as shown above in 4.13, do fall within the broad
identified range. In this regard, they are not considered to be significantly out of
kilter with the market and therefore are appropriate for the purposes of the appraisal
testing.
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5.0 Evidence – brownfield
5.1 ‘Brownfield’ refers to sites that either currently have existing buildings, or previously
had buildings on the site (and have now been cleared). In other words, a brownfield
site is classed as land that is either currently developed or has been developed in
the past.
5.2 At the Stakeholder workshop, and in the 3 subsequent completed questionnaires
received, a distinction was made between:
- Brownfield sites which are cleared and immediately ready to develop.
- Brownfield sites which have existing buildings on-site which require demolition
(and may require vacating if occupied).
5.3 The general view given by the Stakeholders was that brownfield sites with existing
buildings in situ may have a significantly higher TLV than brownfield sites which are
already cleared. We have subsequently considered this when analysing evidence.
5.4 We have identified the following TLVs for cleared brownfield sites, identified from
viability appraisals received from applicants. For the purposes of this exercise we
have looked at TLVs for brownfield sites again across the North East of England,
Yorkshire and the East Midlands. Whilst a large geographical area this gives a good
indication of how TLVs for brownfield sites are assessed in other regions.
Low value area South Yorkshire – former industrial works, gross size 1.64
Ha, proposal for 60 dwellings. Abnormals circa £714,000 per net Ha.
Average house price £1,562 per sq m. June 14 a national developer
submitted a viability appraisal, indicating a TLV equivalent to £274,556 per
gross Ha.
Medium value area West Yorkshire – former industrial facility. Gross area
1.93 Ha, proposal for 68 dwellings. Abnormals circa £609,000 per net Ha.
Average house price £1,725 per sq m. Jan 15 a local agent submitted a
viability appraisal, indicating a TLV equivalent to £839,302 per gross acre.
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Medium value area Lincolnshire – former industrial site. Gross area 0.40
Ha, proposal for 12 dwellings. Abnormals circa £447,000 per net Ha.
Average house price £1,748 per sq m. Mar 16 a regional development
consultant submitted a viability appraisal, indicating a TLV equivalent to
£599,030 per gross Ha.
High value area South Yorkshire – cleared former school. Gross area 2.23
Ha, proposal for 52 dwellings. Abnormals circa £228,000 per net Ha.
Average house price £2,107 per sq m. May 14 a national housebuilder
submitted a viability appraisal, indicating a TLV equivalent to £1,345,372
per gross Ha.
High value area Derbyshire – former airfield. Gross site area 39.35 Ha,
proposal for 367 dwellings. Abnormals circa £259,000 per net Ha. Average
house price £2,115 per sq m. May 14 a regional development consultant
submitted a viability appraisal, indicating a TLV equivalent to £170,632 per
gross Ha.
Medium value area Lincolnshire – cleared former industrial. Gross area 1.18
Ha, proposal for 23 dwellings. Abnormals circa £115,000 per net Ha.
Average house price £1,763 per sq m. Apr 16 a regional firm of chartered
surveyors submitted a viability appraisal, indicating a TLV equivalent to
£220,866 per gross Ha.
5.5 As the sample is relatively small it is difficult to draw any firm conclusions. However,
what the data appears to show is a wide variance (£170,000 to £1,345,000) in the
level of TLV for cleared brownfield sites, depending on the nature of the site (e.g.
level of abnormals, size of site, former use, housing values achievable etc).
5.6 For brownfield sites with existing buildings in situ (some occupied, some not), we
have identified the following TLVs:
Low value area South Yorkshire – industrial buildings on site, gross size
1.50 Ha, proposal for 17 dwellings. Abnormals circa £43,000 per net Ha.
Average house price £1,423 per sq m. Nov 15 a local firm of architects
submitted a viability appraisal, indicating a TLV equivalent to £26,642 per
gross Ha.
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Low value area West Yorkshire – industrial buildings. Gross area 0.30 Ha,
proposal for 14 dwellings. Abnormals circa £791,000 per net Ha. Average
house price £1,557 per sq m. Jun 16 a local agent submitted a viability
appraisal, indicating a TLV equivalent to £1,455,521 per gross acre.
Medium value area Derbyshire – industrial estate. Gross area 18 Ha,
proposal for 600 dwellings. Abnormals circa £164,000 per net Ha. Average
house price £1,665 per sq m. Mar 15 a national firm of chartered surveyors
submitted a viability appraisal, indicating a TLV equivalent to £511,215 per
gross Ha.
Medium value area Nottinghamshire – petrol station. Gross area 0.57 Ha,
proposal for 16 dwellings. Abnormals not stated. Average house price
£1,882 per sq m. Jul 15 a local developer submitted a viability appraisal,
indicating a TLV equivalent to £480,279 per gross Ha.
Medium value area West Yorkshire – industrial estate. Gross site area 1.43
Ha, proposal for 65 dwellings. Abnormals circa £537,000 per net Ha.
Average house price £1,948 per sq m. Jan 15 a local chartered surveyor
submitted a viability appraisal, indicating a TLV equivalent to £665,000 per
gross Ha.
Medium value area Lincolnshire – public house. Gross site area 0.34 Ha,
proposal for 32 dwellings. Abnormals not stated. Average house price
£2,000 per sq m. Feb 15 a local chartered surveyor submitted a viability
appraisal, indicating a TLV equivalent to £1,853,250 per gross Ha.
Medium value area West Yorkshire – public house. Gross site area 0.32 Ha,
proposal for 20 dwellings. Abnormals circa £50,000 per net Ha. Average
house price £2,022 per sq m. Jan 15 a regional planning consultant
submitted a viability appraisal, indicating a TLV equivalent to £879,000 per
gross Ha.
Medium value area West Yorkshire – industrial estate. Gross site area 1.20
Ha, proposal for 48 dwellings. Abnormals circa £857,000 per net Ha.
Average house price £2,133 per sq m. Mar 16 a local chartered surveyor
submitted a viability appraisal, indicating a TLV equivalent to £603,000 per
gross Ha.
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High value area Nottinghamshire – public house. Gross site area 0.12 Ha,
proposal for 16 dwellings. Abnormals not stated. Average house price
£2,181 per sq m. Mar 16 a local chartered surveyor submitted a viability
appraisal, indicating a TLV equivalent to £1,676,574 per gross Ha.
High value area West Yorkshire – office buildings. Gross site area 0.68 Ha,
proposal for 22 dwellings. Abnormals circa £264,000 per net Ha. Average
house price £2,530 per sq m. Mar 16 a national firm of chartered surveyors
submitted a viability appraisal, indicating a TLV equivalent to £1,630,000
per gross Ha.
5.7 Again, the evidence points to a large variance in TLV depending on the specific
nature of the site, and in particular the nature of the existing buildings (in this case
the range is £26,642 to £1,853,250 per gross Ha). There is therefore no discernible
pattern in the TLVs for brownfield sites.
5.8 In short, we therefore conclude that the variance between CUVs for brownfield sites
across different locations is considered to be higher than for greenfield sites. This
may be partly due to agricultural land values remain relatively consistent across
regions, therefore the underlying CUV of a greenfield site will not be subject to more
minimal change across low, medium and high value areas. In contrast, the CUV’s
for brownfield sites are likely to vary more significantly. For example, a prime
serviced industrial site (with good links to the motorway network) may have a CUV
of £750,000 - £1,000,000 per Ha. A tertiary industrial site, with poor access to the
motorways, may only have a CUV of sub £250,000 per Ha. Whilst perhaps an
extreme example, it highlights the potential for variance in brownfield site TLVs.
5.9 Equally, our experience is that the AUV is likely to play a bigger role on brownfield
rather than greenfield sites. For example, a brownfield site in an old industrial area
may be viewed as having potential for long term regeneration, therefore other
employment uses (offices, retail, leisure etc) may need to be factored into the TLV
(which may have a significantly higher value). This, in some cases, this may
significantly increase the TLV for a brownfield site.
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5.10 For these reasons, the method of establishing a CUV and then adding some level
of incentive uplift (which in our experience tends to be an uplift of between 10% and
30%), alongside an assessment of any credible AUV, can produce a wide range of
TLVs for brownfield sites. It is therefore difficult to provide 1 or 2 overall averages
across an area for brownfield sites, because the CUV / AUV of each site will need
to be rigorously assessed before any meaningful conclusion is made.
5.11 In this regard, we have considered the conclusions drawn on suitable brownfield
TLVs from other area wide studies (please note we have excluded the Peter Brett
reports referenced above, on the basis that these reports do not give explicit figures
for brownfield sites, they only provide a combined average for greenfield and
brownfield sites. Furthermore, we have not included the GVA reports as it is unclear
what TLVs have been applied to brownfield sites):
Sheffield City Council CIL Viability Study – undertaken by BNP Paribas,
dated Feb 2014. The report concludes “the approach of using current
use values is a more reliable indicator of viability than using market
values or prices paid for sites” and for “lower value secondary (and
redundant) industrial space” adopts a TLV of £494,000 per Ha.
Wakefield Metropolitan District Council CIL Viability Study – undertaken
by DTZ, dated Feb 2014. Adopts the following benchmark land values:
low value area £679,537 per net Ha, medium value area £834,000 per
net Ha and high value area £988,400 per net Ha. It is stressed that these
figures are based on net areas, therefore is difficult to compare with our
study which assumes gross areas. Also, the DTZ does not differentiate
between greenfield or brownfield values.
Mansfield District Council Local Plan: Viability Assessment –
undertaken by DSP Planning and Development Viability Consultants,
dated Nov 2015. TLV range of £350,000 to £500,000 per Ha. However,
DSP do not differentiate between greenfield or brownfield values.
Calderdale Council Local Plan and CIL Viability Evidence – undertaken
by GVA, dated Oct 2015. Greenfield TLV of £383,005 per Ha.
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Gedling Borough Council Local Plan Viability Assessment – undertaken
by NCS, dated Mar 2016. Brownfield TLV £991,238 per Ha.
Leicester City Council CIL Viability Study Update – undertaken by HDH
Planning in December 2014. For brownfield sites, the report assumes
an average TLV range (based on the CUV + 20%) of £420,000 to
£528,000 per gross Ha (depending on the nature of the current use and
location).
5.12 Taking the mid-point of the ranges (where applicable) the above shows an average
TLV for a brownfield site of £600,207 per gross Ha.
5.13 It is difficult to draw any firm conclusions from the data assessed and would stress
it is less reliable to establish an average TLV for brownfield sites than greenfield
sites due to the potential variance in CUVs and greater impact of locational factors.
5.14 Please note, the evidence identified is related to other market locations, and as
indicated above when assessing brownfield sites locational factors are even more
important when assessing appropriate TLVs. We have subsequently assessed
market transactions to provide a further insight into the local market.
5.15 As indicated above, in addition to the ‘direct’ TLV evidence identified above, we
have also looked to analyse actual land transactions as part of our considerations,
albeit using this only as a general ‘sense check’.
5.16 We have identified the following sample of brownfield transactions which have
taken place after Jan 2014, for sites in excess of 0.25 Ha:
Table 2 – Brownfield transactional evidence
DATE ADDRESS PRICE GROSS
(Ha) £ PER HA
Apr-14 Land at Carr House Road, Doncaster DN1 £450,000 3.32 £135,542
Jun-14 Sandtoft Indust Est, Belton DN10 £200,000 0.81 £247,219
Jun-14 Belton Road, Sandtoft DN8 £900,000 5.10 £71,417
Jul-14 Former Youth Club, Kirkby Avenue DN5 £85,000 0.25 £340,000
Nov-14 Kirk Sandall Indust Est, Doncaster Rd DN3 £1,100,000 2.13 £516,432
Dec-14 Holme Wood Lane, Armthorpe £9,018,960 15.70 £574,090
Dec-14 Ancient Lane, Hatfield Woodhouse DN7 £290,000 0.53 £547,170
Dec-14 Thorne Hall & Depot, Ellison St, Thorne DN8 £151,000 0.57 £264,912
Feb-15 Former highway depot,Station Rd,Misterton DN10 £227,000 0.35 £648,571
Feb-15 Almholme Grange, Almholme Lane, Arksey (UNSOLD at auction Feb 2015)
£260,000 0.81 £320,988
Mar-15 Park Drive, Sprotbrough £150,000 0.96 £63,234
Mar-15 Lakside Boulevard, Doncaster DN4 £4,350,000 5.55 £783,784
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Apr-15 Former Rossington Colliery,New RossingtonDN11 £2,773,438 2.91 £953,071
Jul-15 North side Stevens Rd, Balby DN4 £1,400,000 2.51 £557,769
Aug-15 Land west Carr House Road, Doncaster DN2 £325,000 0.45 £722,222
Aug-15 Former Belle Vue Stadium, Bawtry Rd DN4 £2,135,200 3.58 £596,425
Aug-15 Ashmount Club 50, High Road, Balby DN4 £200,000 0.30 £666,667
Sep-15 Snape Lane, Harworth DN11 £288,000 0.81 £355,556
Nov-15 Westwood Business Park, Belton Rd DN8 £570,000 1.21 £471,074
Nov-15 Briars Lane, Stainforth DN7 £1,200,000 1.80 £666,667
Feb-16 Glebe House, Haynes Road, Thorne DN8 £200,000 0.40 £500,000
Mar-16 Former Reservoir, Green Lane, Scawthorpe DN5 £736,619 0.86 £856,534
Apr-16 Sandall Lane, Kirk Sandall DN3 £240,000 0.60 £400,000
5.17 As per our greenfield land assessment, when researching brownfield sites we
initially attempted to identify the price paid by volume housebuilders for current ‘live’
housing schemes across Doncaster Borough. Again, this proved extremely difficult
as often the price paid was not available, or the deal was complicated to the extent
where we were unable to identify a single ‘rate per Hectare’ paid.
5.18 Of the 23 transactions a range of £63,234 to £953,071 per gross Ha is shown (with
an average of £489,537 per gross Ha). Again, it is difficult to draw any robust
conclusions given the wide variance in price paid within the sample.
5.19 Again, and as stressed above, the added complication for brownfield sites is that
there is likely to be a significant differential in the price paid linked to whether the
site is currently cleared or currently occupied with existing buildings (this is not an
issue for greenfield sites, which are assumed to be undeveloped). This is because
the ‘current use value’ of the land must be factored into the TLV. For example, a
cleared, redundant former industrial site may effectively have a nil current use value
because it is no longer considered to be economic for industrial purposes (any
value would be based purely on development potential). Alternatively, a brownfield
site which has an existing, occupied office building in situ will clearly have a different
value to a cleared site. Any development potential would be subject to generating
a land value which exceeds the current office use. In this respect, when testing
brownfield sites there is the potential for a significant variance in the TLV
(particularly when compared to greenfield sites, which are assumed to have the
same underlying agricultural existing use).
5.20 Taking all of the above into account, for the purposes of the viability testing we have
looked to differentiate between cleared, brownfield sites and occupied, brownfield
sites, an approach which was supported by the stakeholder engagement. For each,
we have therefore adopted a different TLV, as follows:
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Cleared, brownfield - £185,000 per Ha
Occupied, brownfield - £370,000 per Ha
5.21 It is acknowledged that the reality is there would likely be variations to the adopted
figures, depending on the site’s location, current use, size, condition etc. In this
regard, and particularly for brownfield sites, it is stressed that a ‘site by site’
assessment of the TLV is still appropriate when considering viability. In this respect
the above figures should not be automatically applied to a brownfield site when
determining its viability. However, for the purposes of a high-level, area wide study
the above figures are considered to be appropriate for appraisal testing.
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Appendix 3 Map of the high, medium and low value areas
Appendix 3. Map of the high, medium and low value areas