Coventry Affordable Housing Economic Viability Assessment · Coventry Affordable Housing Economic...

Coventry Affordable Housing Economic Viability Assessment

Coventry City Council

October 2012

Prepared by

GL Hearn Limited

20 Soho Square

London W1D 3QW

T +44 (0)20 7851 4900

F +44 (0)20 7851 4910

glhearn.com



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Contents

Section Page

1 INTRODUCTION 5

2 RESIDENTIAL PROPERTY MARKET COMMENTARY 10

3 METHODOLOGY AND ASSUMPTIONS 34

4 BASE VIABILITY AND BENCHMARKING 42

5 VIABILITY ANALYSIS SUMMARY 45

6 APARTMENT DEVELOPMENT COMMENTARY 48

7 CONCLUSIONS 49

List of Figures

UNDERSTANDING HOUSING DEMAND 10 FIGURE 1:

LONG TERM-HOUSE PRICE TRENDS, UK AND WEST MIDLANDS 12 FIGURE 2 :

MORTGAGE ADVANCES, UK 13 FIGURE 3 :

MORTGAGE ADVANCES, UK 14 FIGURE 4:

AFFORDABILITY OF MARKET HOUSING – MORTGAGE PAYMENTS AS % OF INCOME 15 FIGURE 5:

INDEX ANALYSIS OF SALES VOLUMES, 1996-2010 16 FIGURE 6:

INDEX ANALYSIS OF SALES VOLUMES, 1996-2010 17 FIGURE 7 :

MEDIAN HOUSE PRICES, 1996-2010 18 FIGURE 8:

MEDIAN HOUSE PRICES, 1996-2010 19 FIGURE 9:

AVERAGE HOUSE PRICES IN COVENTRY (ALL PROPERTIES), 2007-2011 21 FIGURE 10:

HOUSE PRICES BY TYPE IN COVENTRY, Q3 2011 21 FIGURE 11:

AVERAGE HOUSE PRICES IN COVENTRY (ALL PROPERTIES), 2007-2011 22 FIGURE 12:

AVERAGE HOUSE PRICES BY SUB-MARKET 22 FIGURE 13:

AVERAGE HOUSE PRICES IN HIGHER-VALUE SOUTH (ALL PROPERTIES), 2007 23 FIGURE 14:

AVERAGE HOUSE PRICES IN MID VALUE SUBURBS (ALL PROPERTIES), 2007-2011 24 FIGURE 15:

AVERAGE HOUSE PRICES IN MIXED CHARACTER INNER AREAS (ALL PROPERTIES), 2007-2011 24 FIGURE 16:



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AVERAGE HOUSE PRICES IN PERIPHERAL ESTATES (ALL PROPERTIES), 2007-2011 25 FIGURE 17:

AVERAGE HOUSE PRICES IN LOWER VALUE NORTH (ALL PROPERTIES), 2007 26 FIGURE 18:

DETACHED HOUSE PRICES BY SUB-MARKET 26 FIGURE 19:

SEMI-DETACHED HOUSE PRICES BY SUB-MARKET 27 FIGURE 20:

TERRACED HOUSE PRICES BY SUB-MARKET 27 FIGURE 21:

PRICES FOR FLATS/MAISONETTES BY SUB-MARKET 28 FIGURE 22:

INDEXED ANALYSIS OF SALES VOLUMES IN SUB-MARKETS, 2007 29 FIGURE 23:

INDEXED ANALYSIS OF SALES VOLUMES BY TYPE, 2007-2011 29 FIGURE 24:

INDEXED ANALYSIS OF SALES VOLUMES BY TYPE, 2007-2011 30 FIGURE 25:

List of Tables

SUMMARY TABLE OF RECENT RESIDENTIAL SCHEMES IN COVENTRY 33 TABLE 1:

HYPOTHETICAL SCENARIOS 34 TABLE 2:

PRIVATE SALES VALUES 35 TABLE 3:

SOCIAL RENTED ASSUMED SALES VALUES 37 TABLE 4:

SHARED EQUITY ASSUMES SALES VALUES 37 TABLE 5:

SHARED OWNERSHIP ASSUMED SALES VALUES 38 TABLE 6:

BASE RESIDUAL LAND VALUE TABLE 43 TABLE 7:

BENCHMARKING BANDINGS / RED AMBER GREEN ANALYSIS 44 TABLE 8:

50 / 50 SOCIAL RENTED / SHARED EQUITY 46 TABLE 9:

50 / 50 SOCIAL RENTED / SHARED OWNERSHIP 47 TABLE 10:

List of Appendices

1 SUMMARY OF KEY ASSUMPTIONS 49

2 RESIDENTIAL SUMMARY TABLES 51

3 RED, GREEN, AMBER (RAG) ANALYSIS SUMMARY TABLES 56

4 APARTMENT DEVELOPMENT APPRAISALS 64

5 ADDITIONAL MARKET INFORMATION 70



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Quality Standards Control

The signatories below verify that this document has been prepared in accordance with our quality control

requirements. These procedures do not affect the content and views expressed by the originator.

This document must only be treated as a draft unless it is has been signed by the Originators and approved

by a Business or Associate Director.

DATE ORIGINATORS APPROVED

25th Oct 2012 Guy Ingham George Barnes

Associate Director

Limitations

This document has been prepared for the stated objective and should not be used for any other purpose

without the prior written authority of GL Hearn; we accept no responsibility or liability for the consequences of

this document being used for a purpose other than for which it was commissioned.



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1 INTRODUCTION

1.1 GL Hearn was appointed in November 2011 to undertake an Affordable Housing Economic Viability

Assessment (AHEVA) for Coventry, which is being produced in parallel with an updated Strategic

Housing Market Assessment (SHMA) for the City. Both studies will contribute towards the evidence

base for the emerging Local Development Framework and specifically to help inform the

development of the Core Strategy.

1.2 The AHEVA was commissioned as a separate Additional Research Option under the Council's Brief

for the SHMA Consultancy work.

1.3 The principal aims of the AHEVA were to provide a robust and justified assessment of affordable

housing viability within the various housing market areas of Coventry as identified in the SHMA. It

would provide evidence to inform the setting of thresholds and proportions of affordable housing

within the Core Strategy in line with national planning guidance.

Housing Sub Market Area

1.4 The draft SHMA has identified 5 distinct Housing Sub-Market areas in the City. For ease of

reference the Sub-Market areas are set out in the diagram below followed by a brief description of

the areas.



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Higher-Value South

1.5 The south of the City, comprising the wards of Earlsdon and Wainbody, was consistently identified

by estate agents as the most desirable. These two wards demonstrated the highest house prices

across all housing types.

Mid-Value Outer West / South West Suburbs

1.6 The mid-value suburbs describe a group of wards around the fringes of the City which contain a mix

of property types, but are generally focused on ‘mid market’ semi-detached and terraced properties.

This group of areas comprises Westwood, Woodlands, Cheylesmore and Bablake focused in the

west and south of the City. These areas contain some ‘peripheral’ estates which were developed as

social housing at Tile Hill and Canley (in the west of the City).

Mixed Character Inner East / West

1.7 The third group comprises a series of neighbourhoods which are more urban and mixed in

character, with more than 55% of sales / stock comprising terraced housing in most wards. It

includes the wards of Whoberley, Sherbourne, Lower Stoke and Wyken. Housing in these areas

is at medium-level prices.

Large Peripheral Estates

1.8 The fourth sub-market includes the wards of Henley and Binley and Willenhall which contain large

estates built as social housing – but overall are more moderately priced than Westwood/Woodlands.

Lower Value North

1.9 The north of the City is recognised by estate agents as the lowest value area. It comprises the

wards of St Michael’s, Foleshill, Longford, Radford, Holbrook, and Upper Stoke. This area

demonstrates the lowest house prices in the City.



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1.10 Issued on March 27th 2012, the National Planning Policy Framework (NPPF) sets out the Coalition

Government planning policies for England and how these are expected to be applied. It is a

material consideration. The Framework sets out what is considered to be relevant, proportionate

and necessary within which Council’s and local people can produce their own local and

neighbourhood plans that are reflective of their communities.

1.11 At the heart of the NPPF is a presumption in favour of sustainable development as set out in

paragraph 14.

1.12 In relation to housing and affordable housing, the government’s objective of increasing the supply of

all housing is restated, together with an aim to improve choice, widen opportunity for home

ownership and create sustainable, inclusive and mixed communities.

1.13 Paragraph 158 of the NPPF deals with ‘Using a Proportionate Evidence Base’ and requires that

local planning authorities should ‘ensure that the Local Plan is based on adequate, up-to-date and

relevant evidence about the economic, social and environmental prospects of the area. Local

planning authorities should ensure that their assessment of and strategies for housing, employment

and other uses are integrated, and that they take full account of relevant market and economic

signals’.

1.14 Paragraphs 173-177 relate to viability and deliverability, paragraph 173 stating, ‘Pursuing

sustainable development requires careful attention to viability and costs in plan-making and

decision-taking. Plans should be deliverable. Therefore, the sites and 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 costs

of development and mitigation, provide competitive returns to a willing land owner and willing

developer to enable the development to be deliverable’.

1.15 Details of the Council’s existing affordable housing policies are contained in Coventry City Council’s

Affordable Housing Supplementary Planning Guidance (SPG), which was adopted in February

2006. The existing guidance clarifies the expectations of the Council on landowners, developers

and Registered Providers in respect of affordable housing when undertaking residential

development.

1.16 The Council’s current threshold and affordable housing requirement is in accordance with Policy

H10 of the Coventry Development Plan 2001, as clarified by the Supplementary Planning Guidance

– Affordable Housing adopted February 2006. The current policy requires either 20% or 25% on



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sites of 25 or more dwellings to be affordable, depending upon the level of affordable housing which

already exists in the locality by reference to a tenure map appended to the SPG. However the

current CDP does also specify that no affordable housing contribution is required for development

inside the City Centre Ring Road.

Preliminary Affordable Housing Economic Viability Assessment - March 2009

1.17 A Preliminary Affordable Housing Economic Viability Assessment was undertaken in March 2009 by

the Council. The study tested three hypothetical schemes of 16 dwellings, 58 dwellings and 120

dwellings with all scenarios comprising a mix of apartment and housing units representative of the

development mix coming forward in the City.

1.18 The medium sized scheme (58 dwellings) was assessed against 5 affordable housing thresholds

namely 0% (100% private), 18% (the lowest bracket identified in the previous SHMA), 25% (the

higher of the 2 existing policy requirements), 29% (as a measure above the current thresholds) and

40% (as an upper limit adopted by other local authorities around the Country). The small (16 units)

and large (120 units) schemes where assessed on the basis of a 25% affordable housing

requirement.

1.19 The findings of the analysis is set out below:-

Medium sized scheme scenario:

• The use of 18% affordable housing requirement would provide an overly acceptable land value

and therefore the Council would be within its rights to consider making a greater request for

contributions.

• At 40% the residual land value would be unacceptable to the landowner and development is

unlikely to come forward on this basis.

• A 29% affordable housing contribution may prove acceptable on some sites, but only if HCA

funding was made available.

• The use of 25% affordable housing is the closest level of contribution to achieving a 50% land

value i.e. 50% of the full market value of the land if otherwise free of an affordable housing

requirement.

Small and large scheme scenario:

• The viability analysis indicated that the 25% requirement to be a viable option for both schemes.



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Our Approach / Report Structure

1.20 The housing needs and market analysis undertaken to inform the updated SHMA is based on an

assessment of the balance between the need for market housing and the need for affordable

housing but does not fully account for commercial factors - i.e. what is viable, and what it is realistic

to ask developers to provide.

1.21 Building on the work undertaken as part of the preliminary AHEVA in 2009 the following analysis

focuses on the commercial viability of development to enable the Council to make an informed

decision on the appropriate affordable housing target or targets to include within the emerging Core

Strategy.

1.22 Specifically this Study investigates and assesses the impact on land values and viability through

sensitivity analysis on residential density and varying affordable housing thresholds. Unlike the

preliminary AHEVA, this assessed viability against an assumed tipping point equating to 50% of

land value, the following analysis benchmarks viability against existing / alternative use land values.

This approach is set out in further detail in Section 3.

1.23 A summary of the current residential property market in Coventry is set out in Chapter 2, which

provide details of how sales values vary across the Sub Market Areas in the City. The methodology

and assumptions adopted for the viability analysis are described in Chapter 3. The results and

bench marking analysis is discussed in Chapter 4 to 6 and the conclusions set out in Chapter 7.



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2 RESIDENTIAL PROPERTY MARKET COMMENTARY

Introduction

2.1 This section of the report, which is also included in section 7 of the SHMA, explores housing market

dynamics in Coventry. It considers key influences on housing demand, looking first at macro-

economic factors before moving to consider more local dynamics, building on an interrogation of

house prices and sales rates together with qualitative evidence from local estate and letting agents.

We draw the analysis together at the end of the section to consider prospects for the housing

market.

2.2 It is important to understand that the housing market is influenced by macro-economic factors, as

well as the housing market conditions at a regional and local level. There are a number of key

influences on housing demand, which are summarised in the chart below (Figure 1).

Understanding Housing Demand Figure 1:

Source: GL Hearn

2.3 The housing market is complex. It is influenced by the economy at both a macro-economic level, in

terms of interest rates and mortgage availability as well as market sentiment (which is influenced by

economic performance and prospects at the macro-level). It is also influenced by the economy at

both regional and local levels, recognising that employment trends will influence migration patterns

Demand Influences

Existing Stock & Market

Quality of Place

Employment & Earnings

Access to Finance

Demographic Changes

Accessibility to

Employment Centres



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(as people move to and from areas to access jobs), and that the nature of employment growth and

labour demand will influence changes in earnings (which influences affordability).

2.4 Housing demand over the longer-term is influenced by population and economic trends. Changes in

the size and structure of the population directly influence housing need and demand, and the nature

of demand for different housing products. Economic performance influences migration between

different areas.

2.5 There are then a number of factors which play out at a more local level, within a functional housing

market, and influence demand in different locations. These include quality of place, school

performance and the catchments of good schools, the accessibility of areas including to

employment centres (with transport links being an important component of this), and the existing

housing market and local market conditions. These factors influence the demand profile and pricing,

against a context in which households compete within the market for housing.

2.6 At a local level, this means that the housing market (in terms of the profile of buyers) tends to be

influenced by and reinforce to some degree around the existing stock. However regenerative

investment or delivery of new transport infrastructure can influence the profile of housing demand in

a location, by affecting its attractiveness to different households.

2.7 Local housing markets or sub-markets are also influenced by dynamics in surrounding areas, in

regard to the relative balance between supply and demand in different markets; and the relative

pricing of housing within them. Understanding relative pricing and price trends is thus important.

Understanding the Macro-Level Dynamics

2.8 Much has been written over the last few years about economic performance and outlook. The UK

economy, as well as a number of the major global economies, experienced an economic recession

which lasted six quarters from Q3 2008 until the end of 2009. Over the last two years (2010 and

2011) the economy has grown but relatively weakly.

2.9 The Halifax House Price Index (for a standard property) indicates that UK house prices fell sharply

between Q4 2007 – Q2 2009. They peaked at £199,766 in Q3 2007. To Q2 2009 they then lost

21% of their value (£42,000) with the price of a standard home falling to £157,767. These trends

were replicated in the West Midlands where prices peaked at £184,958 in Q4 2007 but then fell to

£147,363 in Q2 2009 (a loss of 20%).

2.10 In the second half of 2009 and early 2010 there was some recovery, however since Q3 2010 the

index records that house prices have fallen in each quarter. The latest house price data indicates

that that the price of a standard property in Q3 2011 lies at £149,242 in the West Midlands and



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£162,211 across the UK. The price of a standard home has fallen by -3.0% in the West Midlands

and -2.3% across the UK over the 12 months to Q3 2011.

Long Term-House Price Trends, UK and West Midlands Figure 2:

Source: Halifax House Price Index

2.11 The downturn in the world economy was led by the sub-prime lending crisis in the United States.

This resulted in a fundamental shift in the way banks lent money both between themselves, through

wholesale money markets, and to their customers (including both to home purchasers, landlords

and developers).

2.12 From the second half of 2007, banks begun to increase the inter-bank lending rate (LIBOR) and

sought to adjust their exposure to risk by adopting much more cautious lending practices. The net

effect of this was to reduce liquidity in the financial markets and credit available (resulting in the

‘credit crunch’) and in tightening lending criteria for current and prospective homeowners. This

tightening of lending criteria increasing ‘barriers’ to entry for marginal mortgage applicants by

reducing loan-to-value ratios (LTVs), increase costs associated with mortgages and reducing the

income multiples accepted.

2.13 This has had a significant and sharp impact on the affordability of market housing, with the most

noticeably affected being would-be ‘first-time buyers’ (FTBs) and buy-to-let (BTL) investors who are

particularly reliant on more flexible lending criteria. The levels of both dropped. As a result effective

demand for market housing and market activity dropped dramatically. This is shown in Figure 3

which charts long-term trends in levels of mortgage advances.

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Mortgage Advances, UK Figure 3:

Source: Bank of England Regulated Mortgage Survey

2.14 The chart clearly indicates that levels of mortgage advances were strong in a historical context

between 2001-3 and in 2006; but have fallen since the credit crunch to levels less than half those

achieved at the peak of the market and around 40% below the long-term trend.

2.15 Figure 4 shows deposit requirements for first-time buyers and existing owner-occupiers. As the

availability of mortgage finance increased between 2003-6, the average deposit paid by a first-time

buyer fell from 23.1% to 16.4% nationally, supporting housing demand. Housing supply is relatively

inelastic and was not able to keep pace; contributing to strong growth in house prices across the

country. However since the onset of the credit crunch in 2007, deposit requirements have grown

significantly; and stood on average at 27.5% in 2010 for first-time buyers. The latest data from the

Council for Mortgage Lenders indicates that the average first-time buyer deposit (nationally) in

October 2011 was 20%. The average income multiple was 3.20.

2.16 The average deposit for all house purchases across the UK has risen from 29.3% of the property

value in 2007 to 35.2% in 2010.

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Mortgage Advances, UK Figure 4:

Source: CML Regulated Mortgage Survey

2.17 The level of deposits needed by many first-time buyers has led to a significant drop in the levels of

buyers. Data from the Council for Mortgage Lenders indicates that levels of first-time buyers (based

on mortgage advances) over the last three years, 2008-2010, were half the levels achieved

between 2005-7. The latest data suggests volumes of first-time buyer loans in October 2011 were

1% down on a year previously. Younger buyers (particularly those under 30) are heavily reliant in

the current market on parents and other relatives for financial support in getting on the housing

ladder (the so called ‘bank of mum and dad’).

2.18 The need for savings or equity however is not just an issue for first-time buyers, but existing recent

buyers and those without a large equity cushion. Funding constraints apply across the whole

market, with gross lending in 2011 according to CML estimates of around £138 billion very

moderate relative to their £360 billion pre-credit crunch peak.

2.19 Savings are the key constraint for potential new buyers. Indeed the persistence of low interest rates

has helped to make monthly mortgage payments for first-time buyers the most affordable (at a

national level) for almost eight years at 12.3% of income in October 2011 according to the Council

for Mortgage Lenders highlighting the current affordability of monthly interest payments. Figure 5

uses a slightly different measure to indicate long-term trends in the balance between housing costs

and incomes. With reductions in house prices and low interest rates, market housing is now as

affordable as it was in the late 1990s on this measure for those able to access market housing.

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Affordability of Market Housing – Mortgage Payments as % of Income Figure 5:

Figure 1.5: Affordability of Market Housing - Mortgage Payments as % of Income

Source: Halifax House Price Index

2.20 However despite its relative affordability, effective demand remains weak. The sharp reduction in

demand experienced since 2007 is demonstrated by the drop in sales of residential property.

Current sales in the UK relative to the size of the housing stock (i.e. the turnover of homes in the

private sector market) are currently the lowest for more than 40 years.1 The absence of new

entrants to the market, restrictions on movement for those without significant savings or equity, and

market confidence are combining to result in very low levels of activity, synonymous with low levels

of ‘effective’ market demand for home purchases.

2.21 These trends are equally evident at the local level. Figure 6 provides an indexed analysis of sales

rates whereby 100% is the average level of sales over the 1998-2007 decade. The chart clearly

demonstrates how housing market activity is linked to macro-economic factors given the similarity

between trends across the various geographies. A reduction in sales rates in 2005 is evident, as

market activity responded to an increase in interest rates. However the analysis shows that sales

effectively ‘fell off a cliff’ in 2008 reducing nationally to 47% below the 1998-2007 average (and by

43% in Coventry).

1 CML (Feb 2011) Problems for First-Time Buyers

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Index Analysis of Sales Volumes, 1996-2010 Figure 6:

Source: HM Land Registry, GLH Analysis

2.22 Figure 7 shows very limited subsequent recovery, with sales in 2010 remaining 45% below the

long-term trend nationally, 48% across the West Midlands and 49% below pre-recession levels in

Coventry. Thus effective demand for market housing in 2010 is almost 50% down on pre-recession

levels within the City.

2.23 We have sought to consider trends in early 2011 by analysing quarterly sales data, but adjusting

the results to take account of seasonal trends in sales volumes. This is shown in Figure 1.7. The

analysis indicates that the first half of 2011 saw a further deterioration in sales, to a level in Q2 2011

that was 54% below average sales rates between 1998-2007 in Coventry, compared to 51% lower

across the West Midlands and 50% nationally.

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Index Analysis of Sales Volumes, 1996-2010 Figure 7:

Source: HM Land Registry, GLH Analysis

2.24 The Council for Mortgage Lenders’ (CML) December 2011 Market Commentary describes some of

the underlying drivers of current/ recent dynamics. Overall mortgage lending has been pretty flat for

some while (which is substantiated by the sales analysis above). Prior to Summer 2012, wholesale

funding conditions were getting easier and UK banks were making headway in repaying

Government lending. Improvement in credit availability was resulting in improvements in the

number of mortgage deals available, greater competition for lower loan to value business and a

modestly growing risk appetite.

2.25 There was also a relatively strong pick-up in buy-to-let lending in 2012. The CML describes some of

this as a ‘bounce-back’ following the credit crunch; but notes that the combination of strong

demographics, limited new-build and affordability pressures facing potential home-buyers has

resulted in strong rental demand and upward pressure on rents. We concur with this view.

2.26 However in the second half of 2012, gross mortgage lending turned downwards. The escalating

debt crisis in the Eurozone has resulted in a reduction in access to wholesale funding. Long-term

unsecured wholesale markets remain effectively closed and this is continuing to restrict housing

market performance (sales).

Understanding House Price Trends

2.27 Next we return to look at house price trends. While variation in house prices reflects the relative

desirability of different places to live (for a similar size and quality of home), trends in house prices

are indicative of the balance between supply and demand within the local or regional market. In

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effect, prices go up where there are more buyers than sellers in a local market (and vice-versa).

Figure 8 indicates trends in house prices.

Median House Prices, 1996-2010 Figure 8:

Source: HM Land Registry

2.28 Average house prices grew by 124% between 2000-2010 in Coventry which was higher than the

average growth across the West Midlands of 119%, and similar to the 126% growth experienced

across England.

2.29 Much of this growth however occurred in the period to 2006. If we look at house prices since then,

the picture is very different, as Figure 9 indicates. Between Q2 2006 and Q2 2011 median house

prices increased by just 1% in Coventry (compared to 2% growth across the West Midlands and 7%

nationally). The overall trend in prices in Coventry over the last five years has been downward, with

prices generally remaining static across the West Midlands.

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Median House Prices, 1996-2010 Figure 9:


2.30 The house price trends shown by HM Land Registry data are influenced to some degree by the mix

of properties sold. This is demonstrated by using an alternative measure of house prices. The

Nationwide House Price Index measures the price of a standard property and how this changes

over time (as opposed to the Land Registry data presented which is based on the median of all

sales). The index is mix-adjusted. This indicates that, UK wide, house prices have increased by

1.1% over the year to Q4 2011 but by a more moderate 0.3% in the West Midlands. The Index

identifies that in Coventry house prices (mix-adjusted) were 6% higher than a year ago (but with no

change over the last quarter) at £170,705: 17% above the West Midlands average of £146,109 and

4% above the national average.

2.31 Overall, the picture is one of volatility but relatively stable or static prices in the medium-term (5

years, 2006-11). Given the dearth of buyers (as indicated in the sales trends), the stability/ growth

in prices in 2010 and 2011 is quite remarkable. This reflects current market circumstances in which

there are few ‘forced sales’ with home-owners who wish or need to move, able to rent properties

rather than opt for an immediate sale and low interest rates mitigating against repossessions.

Housing Market Outlook

2.32 Both market activity and house prices growth are relatively subdued, which we would consider as

linked to a combination of:

• Constraints on the availability of mortgage finance – principally the deposits which are necessary

to access competitive mortgage deals, despite historically low current interest rates;

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• Wider macro-economic conditions – where the pace of economic recovery is weak in

comparison to previous recessions and there remain a number of notable economic risks,

including within the Eurozone which is a key export market for the UK, impacting on market

confidence;

• Household finances – where levels of debt remain high and real earnings growth is being

squeezed by inflationary pressures on the one hand and economic conditions and fiscal

tightening on the other.

2.33 The short-term outlook appears to be for much of the same. The Council for Mortgage Lenders

provide an insightful outlook on prospective market trends in 20122 concluding that levels of

housing transactions are expected to remain broadly flat (but identifying a considerable degree of

uncertainty). Halifax forecast broad price stability3 given the likelihood of continuing low interest

rates.

2.34 The CLM consider that the recent Government initiatives to stimulate the market – the new-build

indemnity scheme and enhanced right-to-buy policy – will help stimulate transactions but concludes

that set against wider market drivers (and the removal of stamp duty concessions in March 2012),

‘the benefits are initially likely to be incremental rather than transformative in nature.’

2.35 Continuing high unemployment, which is forecast to persist through 2012 and beyond, is forecast

by CML to result in an increase in repossessions in 2012.

2.36 Critically, the market outlook could be significantly impacted by developments in the Eurozone

sovereign debt crisis. Were the Eurozone to implode this would have wide-ranging economic

consequences including for the UK, and would likely precipitate a marked contraction in lending

activity (from an already subdued level). What happens here is likely to significantly impact on the

cost and availability of mortgage finance.

The Housing Market in Coventry

House Price Trends in Coventry

2.37 House prices in Coventry peaked at £151,700 in Q3 2007 (in common with national trends). To Q1

2009 they then lost 15% of their value (-£22,900) which was similar to market performance across

the West Midlands (-£23,400, -13%). There was some recovery in prices in the second half of 2009,

with house prices in Coventry recovering to £143,000. In 2010 and 2011 house prices have been

relatively volatile, but with the overall trend downwards. Average prices in Q3 2011 in the City were

£138,000.

2 CML (Dec 2011) Market Commentary

3 Halifax (Dec 2012) UK Housing Market Outlook for 2012



GL Hearn of 70

Average House Prices in Coventry (All Properties), 2007-2011 Figure 10:


2.38 Across Coventry, the average house price in Q3 2011 was -4.4% down on a year previously

(compared to a reduction of -3.8% across the West Midlands and -1.8% nationally). This is

indicative of stronger supply than demand.

2.39 Set against the average prices for all properties in the City (in Q3 2011), prices for detached homes

are 71% above average and semi-detached homes 14% above the average for all sales. Prices for

terraced homes were 15% below the average for all sales, and flats/maisonettes 32% below.

House Prices by type in Coventry, Q3 2011 Figure 11:


£115,000

£120,000

£125,000

£130,000

£135,000

£140,000

£145,000

£150,000

£155,000

£236,201

£156,617

£116,685

£93,319

£0

£50,000

£100,000

£150,000

£200,000

£250,000

Detached Semi-Detached Terraced Flat/Maisonette



GL Hearn of 70

2.40 Compared to the relative prices of properties by type at a regional level, prices are relatively higher

for semi-detached stock (particularly) and terraced stock. Semi-detached and terraced stock in the

City have also held their value to a greater extent over the last four years. Between Q3 2007 – Q3

2011 house prices for detached homes in the City fell by -22%, and for flats/maisonettes by -16%.

In contrast the reduction in value for terraced homes (-8%) and semi-detached homes (-9%) was

more moderate. The analysis suggests that relative to supply, demand was stronger for these latter

property types.

Average House Prices in Coventry (All Properties), 2007-2011 Figure 12:


Average House Prices in the Sub-Markets

2.41 We next consider house price trends within the sub-markets. Figure 13 profiles average (mean)

house prices in each of the sub-markets.

Average House Prices by Sub-Market Figure 13:


£0

£50,000

£100,000

£150,000

£200,000

£250,000

£300,000

£350,000

200

7 Q

2

200

7 Q

3

200

7 Q

4

200

8 Q

1

200

8 Q

2

200

8 Q

3

200

8 Q

4

200

9 Q

1

200

9 Q

2

200

9 Q

3

200

9 Q

4

201

0 Q

1

201

0 Q

2

201

0 Q

3

201

0 Q

4

201

1 Q

1

201

1 Q

2

201

1 Q

3

Detached

Semi-Detached

Terraced

Flat/Maisonette

Area 2011 Q3

Lower Value North £104,014

Peripheral Estates £115,312

Mixed Character Inner £131,104

Mixed-Value Suburbs £155,201

Higher-Value South £216,648

Coventry £137,792



GL Hearn of 70

2.42 The highest house prices in the City are within the Higher Value South Sub-Market, with prices

5.7% above the City average. House prices in this sub-market have been relatively volatile over the

last four years (reflecting the smaller size of the area), but with the overall trend slightly upwards.

However in the last 12 months, house prices (to Q3 2011) have fallen by -6.7%.

Average House Prices in Higher-Value South (All Properties), 2007 Figure 14:


2.43 In the Mid Value Suburbs, the price trend over the last four years has been downwards, with a loss

of value of -15%. Most of this was as a result of falling values in late 2007 and 2008. However

prices have also fallen by -6.0% over the last 12 months. Overall prices remain 13% above average

for Coventry.

£190,000

£200,000

£210,000

£220,000

£230,000

£240,000

£250,000

£260,000

£270,000

Higher Value South

South

Linear (South)



GL Hearn of 70

Average House Prices in Mid Value Suburbs (All Properties), 2007-2011 Figure 15:


2.44 In the Mixed Character Inner Areas, house prices have fallen by a more moderate -10% over the

last four years, and have remained remarkably stable since mid 2008. Indeed over the last 12

months, prices have increased marginally by 0.9%. This may reflect demand for cheaper properties

(with values in these areas still 5% below the City average) but in reasonable quality areas.

Average House Prices in Mixed Character Inner Areas (All Properties), 2007-2011 Figure 16:


2.45 In the Peripheral Estates Sub-Market average house prices are -16% below the City-wide average.

Prices have been quite volatile over the last four years (reflecting the smaller size of the area), with

£110,000

£120,000

£130,000

£140,000

£150,000

£160,000

£170,000

£180,000

£190,000

2007

Q2

2007

Q3

2007

Q4

2008

Q1

2008

Q2

2008

Q3

2008

Q4

2009

Q1

2009

Q2

2009

Q3

2009

Q4

2010

Q1

2010

Q2

2010

Q3

2010

Q4

2011

Q1

2011

Q2

2011

Q3

Mid Value Suburbs

£80,000

£90,000

£100,000

£110,000

£120,000

£130,000

£140,000

£150,000

2007

Q2

2007

Q3

2007

Q4

2008

Q1

2008

Q2

2008

Q3

2008

Q4

2009

Q1

2009

Q2

2009

Q3

2009

Q4

2010

Q1

2010

Q2

2010

Q3

2010

Q4

2011

Q1

2011

Q2

2011

Q3

Mixed Character Inner Areas



GL Hearn of 70

a slight downward trend. Over the last 12 months house prices have fallen by -3.6% which is more

moderate than the reduction seen in a number of other parts of the City.

Average House Prices in Peripheral Estates (All Properties), 2007-2011 Figure 17:


2.46 In the Lower Value North Sub-Market (which includes the City Centre), house prices have fallen by

-13% over the last four years, and are a substantial 25% below the City average. Prices declined

significantly in 2008 but since have remained relatively stable. Over the last 12 months house

prices have fallen by -3.6% which is more moderate than the reduction seen in a number of other

parts of the City.

£80,000

£90,000

£100,000

£110,000

£120,000

£130,000

£140,000

£150,000

Peripheral Estates



GL Hearn of 70

Average House Prices in Lower Value North (All Properties), 2007 Figure 18:


2.47 Turning to consider house price trends by property type, detached house prices are highest and

have held up well in the South of the City, but have declined in the Mixed-Value Suburbs and

Mixed-Character Inner Areas.

Detached House Prices by Sub-Market Figure 19:


2.48 Prices for semi-detached properties have grown since 2009 in the Higher Value South and Mixed-

Value Suburbs. There is a particular premium in the Higher Value South. Semi-detached prices

have been relatively stable in other areas.

£80,000

£90,000

£100,000

£110,000

£120,000

£130,000

£140,000

£150,000

2007

Q2

2007

Q3

2007

Q4

2008

Q1

2008

Q2

2008

Q3

2008

Q4

2009

Q1

2009

Q2

2009

Q3

2009

Q4

2010

Q1

2010

Q2

2010

Q3

2010

Q4

2011

Q1

2011

Q2

2011

Q3

Lower Value North

£100,000

£150,000

£200,000

£250,000

£300,000

£350,000

£400,000

£450,000

Mixed

North

Peripheral

South

Suburbs

Coventry



GL Hearn of 70

Semi-Detached House Prices by Sub-Market Figure 20:


2.49 Terraced house prices have grown in the Higher Value South, but in most parts of the City have

remained relatively stable since late 2008. Prices for terraced properties are lowest in the Lower

Value North and Peripheral Estates (in which there is a significant volume of stock).

Terraced House Prices by Sub-Market Figure 21:


2.50 Finally for flats and maisonettes, house prices have been relatively volatile (reflecting a lower

quantity of sales) but in general prices have been falling. This is true in all areas, but particularly the

Higher Value South where flats are now more affordable.

£80,000

£100,000

£120,000

£140,000

£160,000

£180,000

£200,000

£220,000

£240,000

£260,000

Mixed

North

Peripheral

South

Suburbs

Coventry

£80,000

£100,000

£120,000

£140,000

£160,000

£180,000

£200,000

Mixed

North

Peripheral

South

Suburbs

Coventry



GL Hearn of 70

Prices for Flats/Maisonettes by Sub-Market Figure 22:


Sales Trends by Sub-Market

2.51 As we have set out, we regard sales trends as indicative of ‘effective market demand’ for housing.

We have analysed sales trends by type and sub-market.

2.52 Analysis of total sales at a sub-market level indicates that there have been stronger reductions in

effective demand in the lower-value sub-markets – the Lower Value North and Peripheral Estates.

2.53 Figure 1.23 provides an indexed analysis of housing sales using four quarter moving averages from

Q2 2007 to Q3 2011. Sales are benchmarked against average quarterly volumes between Q2 2007

– Q1 20084.

2.54 While all parts of the City saw similar reductions in sales in early 2008, the Higher Value South sub-

market has recovered more strongly followed by the Mixed Character Inner Areas and Mixed Value

Suburbs. In contrast, the Lower Value North and Peripheral Estates have seem more limited

recovery in sales volumes over the last three years (indicative of lower overall demand for homes).

4 This analysis seeks to remove quarterly variation to show overall market trends

£0

£50,000

£100,000

£150,000

£200,000

£250,000

Mixed

North

Peripheral

South

Suburbs

Coventry



GL Hearn of 70

Indexed Analysis of Sales Volumes in Sub-Markets, 2007 Figure 23:


2.55 These dynamics are influenced by differences in the housing mix and quality of place between the

five sub-markets. Figure 24 below benchmarks sales by property type in Coventry (using an

indexed analysis where sales in Q2 2007 = 1). The analysis indicates that sales volumes have been

relatively stronger over the last couple of years for detached and semi-detached properties (which

are those market segments less reliant on demand from investors and first-time buyers).

Indexed Analysis of Sales Volumes by Type, 2007-2011 Figure 24:


0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

Mixed

North

Peripheral

South

Suburbs

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

Detached

Semi-Detached

Terraced

Flat/Maisonette



GL Hearn of 70

2.56 Effective demand for terraced homes and flats/maisonettes remains over 50% down on pre-

recession levels, and we have seen little recovery in demand as yet.

2.57 As a result of these trends, we have seen a moderate shift in the overall profile of sales of

properties over the last four years, as Figure 25 indicates. A higher proportion of sales in 2011 are

made up of semi-detached sales, with lower levels of sales of terraced properties and particularly

flats/maisonettes, relative to four years previously.

Indexed Analysis of Sales Volumes by Type, 2007-2011 Figure 25:


Qualitative Input from Estate Agents

2.58 To corroborate the analysis of house prices and sales, and provide an up-to-date perspective on

housing market conditions in different parts of the City, GL Hearn has undertaken a selected

number of interviews with estate agents in Coventry. It should be recognised that this analysis

represents a ‘snapshot’ of market conditions / dynamics at the point in time at which the discussions

took place (Dec 2011). It provides a short-term view of market dynamics.

Overview of Current Housing Market Conditions

2.59 Current market conditions were described by estate agents as ‘stable’ or ‘static’ by several agents

and ‘very challenging’ by another (who described a lack of available properties). One agent

indicated that they were doing less viewings than 2 years ago but the quality of buyers was higher

(those viewing were more serious buyers), while another said they had sold more properties in the

last year. This latter agent suggested prices had dropped slightly over the last year. These findings

are consistent with our price/ sales analysis.

9% 10%

22%28%

54%

51%

16%11%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Q2/3 2007 Q2/3 2011

Flat/Maisonette

Terraced

Semi-Detached

Detached



GL Hearn of 70

Current Profile of Buyers

2.60 A number of agents described a current ‘dearth’ of First-Time Buyers (FTBs) over the last few years,

reflecting difficulties in obtaining mortgage finance. Levels of FTBs appear to have improved slightly

in 2011 but there are still ‘relatively few’ around. Low levels of FTBs was described as creating

problems with chains (and thus impacting on the wider market). One agent suggested that young

people were ‘risk averse’ and thus continuing to rent against a context of a falling market and

economic uncertainty.

2.61 Low levels of FTBs are impacting on the market for cheaper properties in particular, such as in the

Lower Value North Sub-Market. However demand in 2011 at this end of the market has been

supported by some growth investment interest.

2.62 The availability of buy-to-let mortgages has improved, and house price and rental trends have

improved yields (a result of reduction in house prices reducing purchase costs, set against growth

in rental levels since 2008). Thus it is now a good time for investors to buy, given that yields on

average of 7.0% could be achieved (and the likelihood that prices over the longer-term will rise).

However investment interest has not returned to the levels seen in the ‘buy-to-let boom’ pre-2007.

2.63 Investors typically seek properties valued between £50,000-£120,000 (with demand focused in the

£80,000 - £120,000 bracket). Demand for properties valued under £100,000 was described as

‘mainly from investors.’

2.64 Properties at the top end of the market are currently selling however demand for ‘mid market’

properties was described as more challenging (impacted by the lack of chains).

Hierarchy of Areas

2.65 In regard to the popularity of different areas of the City, estate agents described a hierarchy running

from the South and West (most popular), to the East, with the North of the City being the least

popular. Values for a 3-bed semi-detached property were described as varying by 10-15% between

each of these broad areas.

2.66 The South and West of the City generate the highest prices, and these areas contain both a mix of

properties and good schools. One agent suggested however that while this general trend was

correct, there were areas (pockets) within the East that were popular, such as the Morrisons Estate.

In the North of the City there were fewer areas in which demand was strong.

2.67 The top end of the market is focused on suburban areas within the City (which compete with

surrounding settlements and rural areas). The popularity of the south of the City reflects the better



GL Hearn of 70

quality of housing (higher semi-detached housing in suburban environments). Earlsdon in particular

was identified as popular by a number of agents, followed by Coundon and Wyken.

2.68 Demand for terraced properties, which dominate in the North of the City, is mainly from First-Time

Buyers and Investors. This particularly reflects the availability of cheaper housing. Investment

demand was described by one agent as focused and accessible from the Universities, in areas

such as Stoke, Earlsdon, Canley and Tile Hill. However another agent indicated that investor-

demand is driven more by the yield (the return on the investment) than a preference for a specific

area.

2.69 For FTBs, Earsdon is popular if the buyer can afford to live there. Otherwise Stoke is popular and

offers good value-for-money, as are Wyken, Coundon and Chapelfields.

2.70 For ease of reference a summary of the main schemes now underway in Coventry are set out in the

table below with further information including achieved sales values and agents commentary in

respect of take up appended to this report.



GL Hearn of 70

Summary table of recent residential schemes in Coventry Table 1:

Scheme

Brief Description

Hillside Meadway, Stoke Heath Final phase of 200+ new homes now completed (local

regeneration site)

New Stoke Village (former Peugeot site), Lower Stoke 4 major house-builders progressing the remaining phases

of 1100+ new homes overall. (Regeneration of a former

industrial site.

Bannerbrook Park, Eastern Green / Tile Hill Main developer in the next stages of developing 900+ new

homes overall. (regeneration of a former industrial site)

Icon development (Lythall's Lane / Dunster Place,

Holbrooks)

A new development of 139 new homes under construction

with initial phases complete.

Former Jaguar Cars Works, Brown's Lane, Allesley Main phase of the residential element now in course of

construction – scheme provides for 144 new homes

overall. (local regeneration site)

Wickman's Drive, Banner Lane , Tile Hill New development of 45 new homes under construction

with initial phases complete.

Zest Development (Bennetts Road South / Exhall Road,

Keresley)

New development of 137 new homes in final construction

stage with majority now completed (the site split between

Coventry and Nuneaton & Bedworth Councils)

Spirit Quarters (New Deal for Communities major

regeneration scheme) north east Coventry

3100+ new homes overall. Initial phase of 154 nearing

completion. Next main phase of 230 recently commenced



GL Hearn of 70

3 METHODOLOGY AND ASSUMPTIONS

3.1 We have undertaken the viability analysis using a residual value appraisal model, which is

consistent with the approach typically used by developers when purchasing land. In essence a

residual valuation assesses the Gross Development Value (GDV) of a completed scheme against

the Total Development Cost (TDC) to complete the development. Typically for a scheme to be

viable there needs to be a sufficient gap between the GDV and the TDC to support a sufficient

return (developer’s profit) and a sufficiently attractive land value for the landowner (to incentivise

release of the site for development). An un-viable scheme is one where a poor relationship exists

between GDV and TDC, so that insufficient profit rewards and / or land value can be generated.

3.2 We have undertaken the residual appraisals using Argus Developer, which is a leading industry

standard development appraisal package commonly used by developers and agents alike to assess

development viability. It supports a full cashflow analysis which can impact on development viability.

Hypothetical Schemes

3.3 It was agreed for consistency that the same development scenarios would be used in the viability

assessment as tested in the Council's Preliminary AHEVA in 2009 as the scenarios were still

deemed to be representative of the range of residential schemes coming forward in the City.

3.4 The hypothetical scenarios all comprise a mix of apartments and houses, ranging from 16 to 120

unit schemes as indicated in the table below.

Hypothetical Scenarios Table 2:

16 unit scheme 6 X 1 bed apartments 6 X 2 bed apartments 3 X 2 bed houses 1 X 3 bed houses

58 unit scheme 4 X 1 bed apartments 12 X 2 bed apartments 16 X 2 bed houses 20 X 3 bed houses 6 X 4 bed houses

120 unit scheme 8 X 1 bed apartments 16 X 2 bed apartments 36 X 2 bed houses 50 X 3 bed houses 10 X 4 bed houses



GL Hearn of 70

Value Points

3.5 The market analysis indicates that there is a hierarchy of locations within the City broadly running

from the South and West (most popular), to the East, with the North of the City being the least

popular. The South and West of the City generate the highest prices, and these areas contain both

a mix of properties and good schools. In the North of the City there were fewer areas in which

demand was strong.

3.6 With that said for new build accommodation even relatively small sub-areas can experience wide

variations in sale values within the City. For that reason we have concluded that the most

appropriate approach to financial modelling is to examine the spread of values across the City on a

non-location specific basis and model affordable housing targets against these rather than to seek

to identify and model small sub-markets individually.

3.7 Specifically we have used the results of our property market research to inform a range of “Value

Points” which we consider represent the breadth of the typical local new build market. The Value

Points group areas of similar values together and allows the results of this analysis to be used

independently of location and, more usefully, by approximate development value. This is consistent

with the approach most commonly used for the most recent AHEVA studies in England.

3.8 Accordingly our financial appraisals have examined four ‘Value Points’. Value Point 4 reflects what

we consider to be the highest achievable values in the City. Value Point 1 reflects the lower end of

the market, and a further 2 interim Value Points modelled as indicated in the table below.

Private Sales Values Table 3:

Value

Point

1 bed

apartment

2 bed

apartment

2 bed

house

3 bed

house

4 bed

house

£ per

sq ft

£ per

sq m

4 £118,758 £165,054 £201,285 £224,966 £260,487 £220 £2,368

3 £107,962 £150,049 £182,986 £204,514 £236,806 £200 £2,153

2 £97,166 £135,044 £164,688 £184,063 £213,125 £180 £1,938

1 £86,370 £120,039 £146,389 £163,611 £189,445 £160 £1,722



GL Hearn of 70

3.9 To provide a broad indication of how the Housing Market Sub Areas relate to the value points we

would expect Value Points 3 & 4 to be located in the High Value South, Value Points 2 & 3 in the

Mid-Value Outer West / South West Suburbs, Value Point 1 & 2 in the mixed Character Inner East /

West and predominantly Value Point 1 in the large Peripheral Estates and Lower Value North

Housing Market Sub Areas. (However there will be locations within each of these areas where other

Value Points apply).

3.10 We consider that this represents the most appropriate approach to enable the Council to assess the

impact on viability of various affordable housing target rates across the full spread of values seen in

Coventry.

Affordable Housing Scenarios and Assumptions

3.11 In addition to the 4 Value Points a range of affordable housing development scenarios have also

been tested including:-

• 35% Affordable housing requirement




3.12 For the purpose of the analysis we have adopted a standard mix of 50% Social Rented and 50%

Intermediate (Shared Equity tenures) across all scenarios.

3.13 It is recognised that Affordable Rent tenure may have an impact on potential receipts from rented

accommodation in the future, particularly if a more mature private rented market delivers rental

growth. But at the moment our analysis of prevailing rents is such that the value generated by

Affordable Rent would be almost identical to the figures that we are showing for Social Rented

accommodation. This is considered further in the main SHMA Report and associated appendix.

Accordingly we have not undertaken an alternative analysis on the rented element of the affordable

housing.

3.14 However we have undertaken a sensitivity analysis to indicate the value impact resulting from

comparisons between Shared Equity and Shared Ownership products. It has been acknowledged

that Shared Ownership has not been generally viable for some time as lenders are increasingly

reluctant to provide mortgages for Shared Ownership and there are disadvantages for purchasers

i.e. tenants are having to pay rent from the start on the equity portion retained by the Registered

Providers (RPs) in addition to paying a mortgage on the purchased equity share and having full

maintenance, and insuring responsibilities on 100% of the equity even though they only own part of

the equity.



GL Hearn of 70

3.15 Currently Shared Equity schemes are proving more viable given that they are operated directly by

the main house-builders. In Coventry it is widely recognised that Shared Equity products have

largely superseded shared ownership through RPs and providing that Shared Equity schemes

largely meet the national Homebuy / Firstbuy criteria they are acceptable as satisfying the

Intermediate affordable element.

3.16 We have appraised the value of the affordable housing units using the SDS Proval computer

software package, which is a bespoke appraisal package used by many RPs and consultants

around the country. For the purpose of the analysis we have assumed that no grant funding is

available to subsidise the delivery of either the social rented units or intermediate units.

3.17 The tables below set out the affordable housing sales values adopted for each of the Value Points

by unit type.

Social Rented Assumed Sales Values Table 4:

Shared Equity Assumes Sales Values Table 5:

Value

Point

1 bed

flat

2 bed

flat

2 bed

house

3 bed

house

4 bed

house

£per sq

ft

£per sq

m

% of

Private

sales

values

4 £95,007 £132,043 £161,028 £179,973 £208,289 £176 £1,894

80%

3 £86,370 £120,039 £146,389 £163,611 £189,445 £160 £1,722

80%

2 £77,733 £108,035 £131,750 £147,250 £170,500 £144 £1,550

80%

1 £69,096 £96,031 £117,111 £130,889 £151,556 £128 £1,378

80%

Value

Point

1 bed

flat

2 bed

flat

2 bed

house

3 bed

house

4 bed

house

£per sq

ft

£per sq

m

% of

Private

Sales

Values

4 £41,026 £57,019 £69,535 £77,715 £89,986 £76 £818

35%

3 £39,406 £54,768 £66,790 £74,648 £86,434 £73 £785

36%

2 £38,327 £53,267 £64,960 £72,603 £84,066 £71 £764

39%

1 £37,787 £52,517 £64,045 £71,580 £82,882 £70 £753

43%



GL Hearn of 70

Shared Ownership Assumed Sales Values Table 6:

Value

Point

1 bed

flat

2 bed

flat

2 bed

house

3 bed

house

4 bed

house

£per

sq ft

£per sq

m

% of

Private

Sales

values

4 £69,636 £96,782 £118,026 £131,912 £152,740 £129 £1,388

58%

3 £63,158 £87,779 £107,047 £119,641 £138,532 £117 £1,259

58%

2 £56,140 £78,025 £95,153 £106,347 £123,139 £104 £1,119

58%

1 £53,981 £75,024 £91,493 £102,257 £118,403 £100 £1,076

58%

Density Assumptions

3.18 We have also analysed four densities scenarios of 35, 50, 60 and 70 dwellings per hectare to

understand the impact on viability. Although the viability analysis has been undertaken for all

scenarios and the outcome analysed, the focus of the analysis has been on the 35 dwellings per

hectare as the most likely residential density scenario for the mix of typologies that we have

examined.

Other Assumptions

3.19 The appraisal model also includes a range of other variables which need to be taken into account

when calculating the residual land value. The assumptions adopted are based on GL Hearn’s

experience through similar studies and through discussions with developers, valuers and agents.

For ease of reference these are set out below.

Base Build Costs

3.20 The one exception to the above is in respect of the base build costs, which were assessed using

BCIS (adjusted for location). We have adopted build costs between the medium and upper quartile

banding to reflect a good quality of development in order to meet Code for Sustainable Homes

Level 4 requirements as indicated below:-

• Base Build Costs (Apartments) - £970/sq m (£90 per sq ft)

• Base Build Costs (Houses) - £860/sq m (£80 per sq ft)

3.21 The above costs are applied to the Gross Internal Area (GIA) of the accommodation.

3.22 Base costs for Apartments are likely to be higher than for a scheme of houses particularly where

sites are constrained and often difficult to work on (involving materials storage difficulties, craning

etc).



GL Hearn of 70

3.23 We have applied standard market sized units for the purpose of the appraisal. A gross to net

allowance for the flatted schemes of 85% has also been allowed to reflect common areas. Given

the relatively low number of apartments incorporated in the three scenarios we have assumed the

apartment blocks will be low rise in nature and typically no more than 3/4 storeys and allowing

standard construction techniques.

3.24 We would highlight that there will always be a range of data and opinions on, and methods of

describing, build costs. GL Hearn are not cost consultants but in our view, we have made

reasonable assumptions which lie within the range of figures we generally see for typical new build

schemes (rather than high specification or particularly complex schemes which might require

particular construction techniques or materials).

Site Preparation and Other Infrastructure Costs

3.25 In addition to the base build cost figures, an allowance needs to be made for a range of site

preparation and infrastructure costs including internal roads, parking, footpaths, landscaping;

utilities, drainage and other services. Many of these items will depend on individual site

circumstances, and can only properly be estimated following a detailed assessment of each site.

3.26 At this stage therefore we have assumed a percentage mark up of 15% on build costs for site

preparation and infrastructure as well as an additional 5% on build costs as a general contingency.

For ease of reference when added to the base construction costs this equates to:-

• £970m2 x 1.2075 = £1171m2 for apartment development

• £860m2 x 1.2075 = £1039m2 for housing development

3.27 We have also included an indicative allowance for S106 contributions as well as for the forthcoming

Community Infrastructure Levy (CIL). Specifically we have adopted £2,000 per private unit for S106

contributions and a CIL tariff equating to £4.65 per sq ft (£50 per sq m) which has been applied to

the private residential floor space.

3.28 It should be noted that at a relatively early stage in the process of nationwide CIL adoption there are

fairly wide variations in rates coming forward and also how they are defined. Whilst some Councils

are proposing a single rate, others have multiple charging zones, or indeed are differentiating

between ‘urban area’ and ‘other’.

3.29 At the date of this report only five CIL rates have been adopted. The two outside London and the

South East are Newark (ranging from £0 to £75 per sq m for residential development) and

Shropshire (ranging from £40 to £80 per sq m). At this stage no particular pattern has emerged and

therefore for the purpose of the analysis we consider the figure adopted to be reasonable. CIL



GL Hearn of 70

viability will need to be examined as part of the process leading up to the Council adopting its own

charging rates.

3.30 In addition to the above the following standard assumptions have been adopted across the

scenarios:-

• Professional fees: 12.5% of build costs;

• Sale legal and Sale agents Fees: 1.0% and 1.5% of Estimated Gross Sales Value respectively;

• Marketing costs equating to £2,000 per private unit;

• Finance (build): 7.0% APR on above build costs over build period;

• Stamp Duty Land Tax: Between 0% - 5% (depending on the Residual Land Value (RLV));

• Legal and agents fees on land transaction of 1.75% (depending on the (RLV);

• A site preparation and build period of 9 months has been assumed for the small scheme; 18

months for the medium sized scheme, and 27 months for larger scheme;

• Sales rates: at 4 units per month with completed affordable housing units transferred to an RP

on completion in the case of the units for rent and shared ownership.

Units Sizes

3.31 The flat sizes used in the modelling are 50 sq m for 1-bed and 70 sq m for 2- bed flats. For 2, 3 and

4-bed houses we have used 85sq m, 95sq m and 110 sq m respectively as representative sizes.

These, as with the flats, are gross internal areas.

3.32 We consider these to be representative of units coming forward for average family accommodation

within the scheme types likely to be suitable for on-site integrated affordable housing. The unit sizes

adopted are also consistent with other AHEVA studies coming forward.

Developers Profit

3.33 The requirement to place an increased proportion of affordable housing on a site will inevitably

reduce the sales revenue that a developer can reasonably expect to receive. As this reduction will

not be accompanied by lower construction costs, the offset must be taken up in a reduced

development profit, a lower land price or a combination of the two.

3.34 Developer’s profit and landowner’s sale price are key considerations that must be taken into

account if residential development is to be undertaken. If profit levels fall below a certain point then

developers will not take the risk of developing a site nor in many cases will funding organisations

lend them the finance to develop. Equally, if the price offered by a developer to a landowner for a

site is too low, the landowner may not sell and instead continue with, or pursue, an existing or

higher value use.



GL Hearn of 70

3.35 GL Hearn’s experience of working with a range of developers indicates that typically Developer’s

Profit requirements are in the region of 20% on cost for private and 8% for affordable. In the context

of the study we have adopted a blended developer’s profit rate of 17.5% on costs which we believe

represent a robust assumption for testing.

3.36 The following sections details the outcome of the viability analysis for the three scenarios tested on

the basis of the above assumptions.



GL Hearn of 70

4 BASE VIABILITY AND BENCHMARKING

4.1 The following section of the report provides details of the benchmarking methodology adopted and

as well as the outcome of the viability analysis.

4.2 As previously mentioned in undertaking our assessment of viability we have utilised a commercial

software package, Argus Developer, to undertake development appraisals using the residual

valuation method. This is in line with generally accepted best practice and the emerging RICS

guidance note “Financial Viability in Planning”. The residual method calculates land value using the

following formula:

Value of completed development scheme (Gross Development Value)

Less

Development costs (which includes build costs, fees, contingency, finance costs etc)

Less

Developer’s return (target profit which a developer will require to undertake the scheme

based on risk)

Less

Planning obligations (CIL, affordable housing etc)

Equals

Residual Land Value

4.3 Each of these elements of the formula is calculated with regard to local market practice (prevailing

costs and values, standard requirements on profit, finance costs etc) based on assumptions which

we have examined in previous sections of this report. As we examine further elsewhere the

residual land value can be benchmarked against the existing use of the site to assess whether it is

worthwhile bringing it forward for development.

4.4 Set out in the following table are the residual land values produced assuming that the land for

development is available at nil cost.



GL Hearn of 70

Base residual land value table Table 7:

4.5 Although the above provides an indication of viability, in order to have a true reflection of viability, it

is important to compare the base residual land values against values which could be achieved from

existing and alternative uses. Where the residual (base) land value generated through development

is lower than the alternative permitted uses, development is unlikely to come forward as it would not

provide any incentive for the landowner to proceed.

4.6 We have undertaken a review of the information provided in respect of recently developed sites for

residential use in Coventry as well as of sites within the development pipeline, in order to get an

understanding of likely land supply sources. The analysis indicates that types of sites and former

uses are wide ranging. However, a number are being promoted on infill and industrial sites many of

which have now been cleared. As such we have benchmarked the base land values against typical

land values for industrial land as a sensible benchmark.

4.7 The Valuation Office Agency (VOA) provides details of Industrial land values and although it does

not provide specific land values for the Coventry area, it does for the West Midlands. The analysis

Residual Land Value

50/50 Social Rent/Shared Equity

Scenarios Units Affordable Housing

Requirement 35% 30% 25% 20%

16 units

Value Point 1 -£341,124 -£333,392 -£298,861 -£274,195

16 Value Point 2 -£217,256 -£184,761 -£142,172 -£112,703

Value Point 3 -£86,128 -£35,332 £13,197 £44,871

Value Point 4 £42,570 £106,626 £160,084 £196,047

58 units

Value Point 1 -£296,488 -£261,429 -£195,519 -£58,564

58 Value Point 2 £361,328 £373,347 £449,746 £610,071

Value Point 3 £998,262 £1,025,794 £1,114,424 £1,300,107

Value Point 4 £1,674,558 £1,678,242 £1,779,102 £1,990,147

120 units

Value Point 1 -£448,341 -£376,127 -£242,556 -£194,704

120 Value Point 2 £717,107 £869,891 £1,047,268 £1,145,844

Value Point 3 £1,970,214 £2,161,058 £2,380,242 £2,521,035

Value Point 4 £3,223,324 £3,452,228 £3,713,219 £3,896,229



GL Hearn of 70

indicates that land values for industrial land range from £350,000 for smaller centres to £650,000

per hectare for larger centres such as Birmingham.

4.8 The figures that we have adopted will clearly not represent all scenarios across the study area. The

nature of this kind of viability study is that it will need to make some fairly sweeping assumptions on

certain elements of the analysis and base land value is invariably one of these. We consider that

the figure we have adopted is a sensible assumption in the context of land that, subject to planning,

is likely to come forward for development. It is inevitable that developers will look at sites with

higher base values which have the characteristics to be in attractive residential locations. They

may necessitate the relocation of existing employment or residential occupiers and need to cover

existing value which is not catered for within our base assumption. In such cases affordable

housing will be just one of a number of factors which will dictate whether the site is viable or not.

4.9 For the purpose of our analysis we have therefore assumed viability bandings as indicated in the

table below, which acknowledge that there will be a wide range of land values on previously

developed land depending on the quality and location of a site in the city.

4.10 We do not consider it appropriate for the Council’s affordable housing targets to be set based

entirely on such circumstances. There is scope for negotiation around viability matters in these

cases and no doubt the Council will give full and reasonable consideration to any evidence which is

put forward in this respect.

4.11 For ease of reference we have also expressed the analysis using a traffic light system (RAG

analysis). It indicates those development scenarios which indicatively might be regarded as viable

(green), where viability is marginal (yellow) and which are not viable (red) when compared to the

base land values.

Benchmarking Bandings / Red Amber Green Analysis Table 8:

Alternative Use / Existing Use Benchmark

Colour Code

£0 - £350,000 per hectare (not viable)

£350,000 - £650,000 per hectare (marginal)

£650,000 per hectare plus (viable)



GL Hearn of 70

5 VIABILITY ANALYSIS SUMMARY

5.1 We have modelled a number of variations around our core assumptions including examining a

range of potential densities. However, the two tables below show what we take to be our core

analysis. In each case we have assumed a density of 35 dwellings per hectare which we consider

to be most appropriate for the mix of units which makes up our three scenarios. (We have also

modelled outputs based on 50, 60 and 70 units per hectare which are shown at Appendix 2).

5.2 As we have outlined elsewhere, in each case we have applied a target affordable housing rate to

the scheme which has been split 50/50 between rented and intermediate tenures. We have

concluded (see para 3.13) that in the current market there is a negligible difference between Social

and Affordable Rented values and so these have not been illustrated separately. However, as

shown at Table 5 and Table 6 on page 37 & 38, there is a noticeable difference between values that

can be achieved from shared equity and shared ownership and these are illustrated separately in

the two tables below.

5.3 Of course the purpose of this report is to advise the Council as to where their affordable housing

policy target should be set. As might be expected, different value assumptions and unit mixes

produce fairly variable results in terms of viability.

5.4 There is a clear distinction between our two larger scenarios (58 and 120 units) and our smallest –

16 units. The explanation for this relates to the proportion of apartments within the mix which, our

analysis suggests, produces significantly lower land values. As a result the smallest scenario is

consistently less viable through our analysis. (We have examined the specifics of wholly apartment

development further in Section 6 below).

5.5 It is also clear that the drop from Value Point 3 to Value Point 2 has a major impact on viability.

Looking at the shared equity tables, Value Point 3 is viable at all levels of affordable housing tested.

However, it is becoming marginal at Value Point 2 with a clear tipping point beyond 25% affordable

housing and clearly will not be viable once values drop off below these figures. As we have

indicated elsewhere, Value Point 1 by no means represents a floor in values across the study area

and there will be schemes that will be difficult to deliver viably regardless of affordable housing

requirement.

5.6 As might be expected, the higher density models shown at Appendix 3 produce greater land values

and hence the viability equation is improved. However, the change is not so marked as to

fundamentally impact on the tone of the analysis.

GL Hearn of 70

J:\Planning\Job Files\J026572 - Coventry SHMA\Affordable Housing Viability Study\Final Affordable Housing Viability Study 06.09.2012.docx

50 / 50 Social Rented / Shared Equity Table 9:

Residual Value Per hectare Alternative Use / Existing Use Benchmark

Industrial Land Colour Code

35 Dwellings Per Hectare

50/50 Social Rent/Shared Equity £0 - £350,000 per hectare (not viable)



Scenarios Affordable Housing

Requirement 35% 30% 25% 20% 35% 30% 25% 20%

16 units

Value Point 1 -£746,209 -£729,295 -£653,758 -£599,802

Value Point 2 -£475,248 -£404,165 -£311,001 -£246,538

Value Point 3 -£188,405 -£77,289 £28,868 £98,155

Value Point 4 £93,122 £233,244 £350,184 £428,853

58 units

Value Point 1 -£178,915 -£157,759 -£117,986 -£35,340

Value Point 2 £218,043 £225,296 £271,398 £368,146

Value Point 3 £602,399 £619,014 £672,497 £784,547

Value Point 4 £1,010,509 £1,012,732 £1,073,596 £1,200,951

120 units

Value Point 1 -£130,766 -£109,704 -£70,746 -£56,789

Value Point 2 £209,156 £253,718 £305,453 £334,205

Value Point 3 £574,646 £630,309 £694,237 £735,302

Value Point 4 £940,136 £1,006,900 £1,083,022 £1,136,400

GL Hearn of 70

J:\Planning\Job Files\J026572 - Coventry SHMA\Affordable Housing Viability Study\Final Affordable Housing Viability Study 06.09.2012.docx

50 / 50 Social Rented / Shared Ownership Table 10:


Industrial Land Colour Code


50/50 Social Rent/Shared Ownership £0 - £350,000 per hectare (not viable)




Requirement 35% 30% 25% 20% 35% 30% 25% 20%

16 units

Value Point 1 -£867,416 -£793,531 -£717,994 -£637,168

Value Point 2 -£631,186 -£495,445 -£402,235 -£299,609

Value Point 3 -£355,064 -£174,617 -£65,308 £45,441

Value Point 4 -£79,520 £134,190 £251,132 £371,234

58 units

Value Point 1 -£272,838 -£258,415 -£205,064 -£103,322

Value Point 2 £59,691 £92,430 £156,455 £277,638

Value Point 3 £432,172 £476,183 £548,933 £687,252

Value Point 4 £824,446 £856,615 £938,537 £1,094,603

120 units

Value Point 1 -£258,233 -£210,265 -£155,047 -£123,834

Value Point 2 £56,633 £138,465 £194,177 £245,707

Value Point 3 £410,684 £487,612 £574,615 £640,166

Value Point 4 £760,921 £850,928 £952,272 £1,032,414

GL Hearn of 70

6 APARTMENT DEVELOPMENT COMMENTARY

6.1 We discussed in the previous section the outputs produced by our 16 unit scenario which had a

higher proportion of apartments than the other two scenarios. This produces consistently lower

land values. We also had regard to the Council’s existing policy of a zero affordable housing

requirement inside the Ring Road, an area where there is a lack of land available for family housing

development and the prevailing typology coming forward is more likely to be based around flats.

6.2 This led us to consider the need for an analysis based on a 100% flatted scheme.

6.3 We have therefore undertaken two further appraisals (attached at Appendix 4) which examine a 25

unit flatted scheme with no affordable housing provision. The first, at Value Point 2, produces a

residual land value which is little more than break-even – a figure of £45,000. Increasing values to

Value Point 3 produces a residual value of around £300,000. If we assume the same density as in

our previous analysis, this is producing a marginal development even with zero affordable housing.

6.4 As the market picks up, we might expect to see values pushed higher within the more ‘prime’

locations within the study area and in particular the core city centre inside the ring road. However,

by the same token, availability of soft sites will be lower which suggests that looking specifically at

the city centre base land values may well be higher than that adopted as our benchmark for the

study.

6.5 Taking all this into account, we can see an argument for maintaining the Council’s existing policy on

affordable housing within the Ring Road. This would perhaps encourage greater development

activity within this zone which comes with benefits in respect of sustainability and the overall

vibrancy of the city centre. However, whilst there is a clear viability argument for this, it does

remove the potential for delivery of affordable units within the city. Given our comments below in

respect of the negotiability of s106 requirements, which from a viability perspective must be

considered in the round, we do consider that the Council would be justified in setting a consistent

target rate across the area which could be negotiated as appropriate.

GL Hearn of 70

7 CONCLUSIONS

7.1 As might be expected, the scenarios modelled do not provide us with a definitive threshold beyond

which residential development is not viable. It is a matter for the Council to decide the approach

that it wishes to adopt.

7.2 Affordable housing, like other s106 matters, is a negotiable requirement and can be considered and

potentially reduced in the light of a compelling viability argument. That being the case, an argument

could be made that policy should be based around maximisation of numbers extracted from higher

value scenarios. This will ensure that all schemes will provide as much affordable housing as they

are able to afford and lower value locations will be able to maintain viability through s106

negotiations. Given the outputs from Value Point 4 in our tables, it might well be argued that such

an approach could justify a target rate of up to 35%.

7.3 However, there are flaws in this argument. Notwithstanding the potential for negotiated agreements,

on the surface such a policy would seem to render large parts of the study area unviable for

residential development. This could represent a major disincentive to landowners bringing forward

land for residential development and developers from expending the level of cost required to bring

forward schemes and planning applications. This is particularly relevant in a context of a likely

requirement to increase overall housing delivery.

7.4 S106 may be negotiable but the results of those negotiations are by no means guaranteed. The

consequences of such an approach could be a significant reduction in delivery of housing numbers.

It also ignores the need to build a sensible level of headroom into viability discussions, particularly

given that some landowners will expect to see a significant uplift over existing use value to justify

bringing land forward for development in the current market.

7.5 Equally importantly it may foster an expectation that the affordable housing target is a rate which

can be largely ignored because it will generally be negotiated down. This will also create

significantly more work for the Council’s planners, given that they are likely to be faced with viability

negotiations around the majority of planning applications.

7.6 Of course, moving to the other extreme and setting a rate which as far as the Council is able to

gauge will be viable for all schemes coming forward would set the bar too low and reduce the level

of affordable units delivered well below its potential.

7.7 Our market assessment does conclude that there are parts of the study area which are higher value

and it might be argued could support a higher affordable housing rate. Whilst it is true that the

South and West of the city do have more locations/sites which may support values at Value Point 4,

it is also important to note that these areas do show a wide range of values which fall in places to

GL Hearn of 70

Value Point 1 and beyond. Accordingly, if a higher affordable housing rate is set in these areas, it is

still likely that the Council will find some applicants seeking to negotiate a reduction on grounds of

viability. It may be that a split rate will provide encouragement to landowners in the higher rate

band to attempt such negotiations - potentially more so than if a single rate were set. Having said

that, there will clearly be some schemes within these bands that are capable of supporting more

affordable housing and the Council may consider this sufficient justification for the split rate.

7.8 Current planning policy in Coventry only applies the affordable housing requirement to schemes

providing 25 or more total dwellings. As we have indicated in our analysis, we consider the reason

that the smaller of our scenarios generated lower values is to do with the mix – more flats – rather

than the scale. That being the case we can see no particular viability argument as to why smaller

schemes should be exempt.

GL Hearn of 70

Appendices

1. Summary of Key Assumptions

GL Hearn of 70

Coventry City Centre - Affordability Housing Economic Viability Assessment (AHEVA) July 2012

4 Value Points Value Point 4 High

Value Point 3 High / Medium

Value Point 2 Medium / Low

Value Point 1 Low

Hypothetical Schemes Check

Hypothetical Unit Mix 1 2 2 3 4

Scenario 1 16 units 6 6 3 1 16

Scenario 2 58 units 4 12 16 20 6 58

Scenario 3 120 units 8 16 36 50 10 120

Unit Sizes

Sq m (GIA) Sq ft (GIA) Sq M (NIA) Sq ft (NIA)

1 bed Apartment 59 635 50 540

2 bed Apartment 82 883 70 750

2 bed House 85 915

3 bed House 95 1023

4 bed House 110 1184

Affordable Housing Assumptions Base Build Costs (Code 4)

Total Affordable Housing Social Rented Intermediate £ Per Sq M £ Per Sq Ft

Affordable Housing Option 1 35% 50% 50% Apartments 970 90

Affordable Housing Option 2 30% 50% 50% Houses 860 80

Affordable Housing Option 3 25% 50% 50%


Base Build Costs

£ Per sq m £ per sq ft

Apartments (Code 4) 970£ 90£

Houses (Code 4) 860£ 80£

CIL Levels

CIL level 1 50.00£

Values and Costs Assumptions

Private Social Rented Shared Ownership Shared Equity

Value Point 4 £220 £76 £129 £176

1 bed Apartment 118,758£ 41,026£ 69,636£ 95,007£

2 bed Apartment 165,054£ 57,019£ 96,782£ 132,043£

2 bed House 201,285£ 69,535£ 118,026£ 161,028£

3 bed House 224,966£ 77,715£ 131,912£ 179,973£

4 bed House 260,487£ 89,986£ 152,740£ 208,389£

Value Point 3 £200 £73 £117 £160

1 bed Apartment 107,962£ 39,406£ 63,158£ 86,370£

2 bed Apartment 150,049£ 54,768£ 87,779£ 120,039£

2 bed House 182,986£ 66,790£ 107,047£ 146,389£

3 bed House 204,514£ 74,648£ 119,641£ 163,611£

4 bed House 236,806£ 86,434£ 138,532£ 189,445£

Value Point 2 £180 £71 £104 £144

1 bed Apartment 97,166£ 38,327£ 56,140£ 77,733£

2 bed Apartment 135,044£ 53,267£ 78,025£ 108,035£

2 bed House 164,688£ 64,960£ 95,153£ 131,750£

3 bed House 184,063£ 72,603£ 106,347£ 147,250£

4 bed House 213,125£ 84,066£ 123,139£ 170,500£

Value Point 1 £160 £70 £100 £128

1 bed Apartment 86,370£ 37,787£ 53,981£ 69,096£

2 bed Apartment 120,039£ 52,517£ 75,024£ 96,031£

2 bed House 146,389£ 64,045£ 91,493£ 117,111£

3 bed House 163,611£ 71,580£ 102,257£ 130,889£

4 bed House 189,445£ 82,882£ 118,403£ 151,556£

Apartments Houses

Tenure Split

GL Hearn of 70

2. Residential Summary Tables

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Value Point 1


Hypothetical Unit Mix 1 2 3 2 3 4


Scenario 2 58 units 4 12 16 20 6 58

Scenario 3 120 units 8 16 36 50 10 120

Affordable Housing Assumptions

Total Affordable Housing Social Rented Intermediate





35% Affordable Housing 50 / 50 Social Rented / Shared Equity

Scenario 1

Value Point 1 16 units Total Units 16 GDV £1,407,192 GDV £1,454,184

35% Total Private 10 Residual Land Value -£396,533 Residual Land Value -£341,124

Total Affordable 6

Scenario 2



Total Affordable 20

Scenario 3



Total Affordable 42

30% Affordable Housing

Scenario 1



Total Affordable 5

Scenario 2



Total Affordable 17

Scenario 3



Total Affordable 36


Scenario 1



Total Affordable 4

Scenario 2



Total Affordable 15

Scenario 3



Total Affordable 30


Scenario 1



Total Affordable 3

Scenario 2



Total Affordable 12

Scenario 3



Total Affordable 24

Apartments Houses

Tenure Split

50 / 50 Social Rented / Shared Ownership

GL Hearn of 70

Value Point 2




Scenario 2 58 units 4 12 16 20 6 58

Scenario 3 120 units 8 16 36 50 10 120








Scenario 1



Total Affordable 6

Scenario 2


35% Total Private 38 Residual Land Value £98,916 Residual Land Value £361,328

Total Affordable 20

Scenario 3



Total Affordable 42


Scenario 1



Total Affordable 5

Scenario 2



Total Affordable 17

Scenario 3



Total Affordable 36


Scenario 1



Total Affordable 4

Scenario 2



Total Affordable 15

Scenario 3


25% Total Private 90 Residual Land Value £665,751 Residual Land Value £1,047,268

Total Affordable 30


Scenario 1



Total Affordable 3

Scenario 2



Total Affordable 12

Scenario 3



Total Affordable 24

Apartments Houses

Tenure Split


GL Hearn of 70

Value Point 3




Scenario 2 58 units 4 12 16 20 6 58

Scenario 3 120 units 8 16 36 50 10 120








Scenario 1



Total Affordable 6

Scenario 2



Total Affordable 20

Scenario 3


35% Total Private 78 Residual Land Value £1,408,058 Residual Land Value £1,970,214

Total Affordable 42


Scenario 1



Total Affordable 5

Scenario 2



Total Affordable 17

Scenario 3



Total Affordable 36


Scenario 1


25% Total Private 12 Residual Land Value -£29,855 Residual Land Value £13,197

Total Affordable 4

Scenario 2



Total Affordable 15

Scenario 3



Total Affordable 30


Scenario 1



Total Affordable 3

Scenario 2



Total Affordable 12

Scenario 3



Total Affordable 24

Apartments Houses

Tenure Split


GL Hearn of 70

Value Point 4 - High Value Zone




Scenario 2 58 units 4 12 16 20 6 58

Scenario 3 120 units 8 16 36 50 10 120








Scenario 1


35% Total Private 10 Residual Land Value -£36,352 Residual Land Value £42,570

Total Affordable 6

Scenario 2



Total Affordable 20

Scenario 3



Total Affordable 42


Scenario 1



Total Affordable 5

Scenario 2



Total Affordable 17

Scenario 3



Total Affordable 36


Scenario 1



Total Affordable 4

Scenario 2



Total Affordable 15

Scenario 3



Total Affordable 30


Scenario 1



Total Affordable 3

Scenario 2



Total Affordable 12

Scenario 3



Total Affordable 24

Apartments Houses

Tenure Split


GL Hearn of 70

3. Red, Green, Amber (RAG) Analysis Summary Tables

GL Hearn of 70


Colour Code






Requirement 35% 30% 25% 20% 35% 30% 25% 20%

16 units

Value Point 1 -£746,209 -£729,295 -£653,758 -£599,802

Value Point 2 -£475,248 -£404,165 -£311,001 -£246,538

Value Point 3 -£188,405 -£77,289 £28,868 £98,155

Value Point 4 £93,122 £233,244 £350,184 £428,853

58 units

Value Point 1 -£178,915 -£157,759 -£117,986 -£35,340

Value Point 2 £218,043 £225,296 £271,398 £368,146

Value Point 3 £602,399 £619,014 £672,497 £784,547

Value Point 4 £1,010,509 £1,012,732 £1,073,596 £1,200,951

120 units

Value Point 1 -£130,766 -£109,704 -£70,746 -£56,789

Value Point 2 £209,156 £253,718 £305,453 £334,205

Value Point 3 £574,646 £630,309 £694,237 £735,302

Value Point 4 £940,136 £1,006,900 £1,083,022 £1,136,400

GL Hearn of 70


Colour Code






Requirement 35% 30% 25% 20% 35% 30% 25% 20%

16 units

Value Point 1 -£867,416 -£793,531 -£717,994 -£637,168

Value Point 2 -£631,186 -£495,445 -£402,235 -£299,609

Value Point 3 -£355,064 -£174,617 -£65,308 £45,441

Value Point 4 -£79,520 £134,190 £251,132 £371,234

58 units

Value Point 1 -£272,838 -£258,415 -£205,064 -£103,322

Value Point 2 £59,691 £92,430 £156,455 £277,638

Value Point 3 £432,172 £476,183 £548,933 £687,252

Value Point 4 £824,446 £856,615 £938,537 £1,094,603

120 units

Value Point 1 -£258,233 -£210,265 -£155,047 -£123,834

Value Point 2 £56,633 £138,465 £194,177 £245,707

Value Point 3 £410,684 £487,612 £574,615 £640,166

Value Point 4 £760,921 £850,928 £952,272 £1,032,414

GL Hearn of 70


Colour Code






Requirement 35% 30% 25% 20% 35% 30% 25% 20%

16 units

Value Point 1 -£1,066,013 -£1,041,850 -£933,941 -£856,859

Value Point 2 -£678,925 -£577,378 -£444,288 -£352,197

Value Point 3 -£269,150 -£110,413 £41,241 £140,222

Value Point 4 £133,031 £333,206 £500,263 £612,647

58 units

Value Point 1 -£255,593 -£225,370 -£168,551 -£50,486

Value Point 2 £311,490 £321,851 £387,712 £525,923

Value Point 3 £860,571 £884,305 £960,710 £1,120,782

Value Point 4 £1,443,584 £1,446,760 £1,533,709 £1,715,644

120 units

Value Point 1 -£186,809 -£156,720 -£101,065 -£81,127

Value Point 2 £298,795 £362,455 £436,362 £477,435

Value Point 3 £820,923 £900,441 £991,768 £1,050,431

Value Point 4 £1,343,052 £1,438,428 £1,547,175 £1,623,429

GL Hearn of 70


Colour Code






Requirement 35% 30% 25% 20% 35% 30% 25% 20%

16 units

Value Point 1 -£1,239,166 -£1,133,616 -£1,025,706 -£910,241

Value Point 2 -£901,694 -£707,778 -£574,622 -£428,013

Value Point 3 -£507,234 -£249,453 -£93,297 £64,916

Value Point 4 -£113,600 £191,700 £358,759 £530,334

58 units

Value Point 1 -£389,768 -£369,164 -£292,949 -£147,603

Value Point 2 £85,272 £132,042 £223,507 £396,625

Value Point 3 £617,388 £680,261 £784,190 £981,788

Value Point 4 £1,177,780 £1,223,735 £1,340,767 £1,563,719

120 units

Value Point 1 -£368,904 -£300,379 -£221,496 -£176,905

Value Point 2 £80,904 £197,807 £277,396 £351,010

Value Point 3 £586,691 £696,588 £820,879 £914,523

Value Point 4 £1,087,030 £1,215,612 £1,360,389 £1,474,877

GL Hearn of 70


Colour Code





Scenarios 35% 30% 25% 20% 35% 30% 25% 20%

16 units

Value Point 1 -£1,486,999 -£1,360,339 -£1,230,848 -£1,092,289

Value Point 2 -£1,082,033 -£849,334 -£689,546 -£513,615

Value Point 3 -£608,681 -£299,344 -£111,956 £77,899

Value Point 4 -£136,320 £230,040 £430,511 £636,401

58 units

Value Point 1 -£437,060 -£413,956 -£328,494 -£165,512

Value Point 2 £95,619 £148,063 £250,626 £444,749

Value Point 3 £692,298 £762,800 £879,338 £1,100,912

Value Point 4 £1,320,684 £1,372,215 £1,503,447 £1,753,450

120 units

Value Point 1 -£855,857 -£696,879 -£513,871 -£410,421

Value Point 2 £97,085 £237,368 £332,876 £421,212

Value Point 3 £704,029 £835,906 £985,055 £1,097,428

Value Point 4 £1,304,436 £1,458,735 £1,632,467 £1,769,852

GL Hearn of 70


Colour Code






Requirement 35% 30% 25% 20% 35% 30% 25% 20%

16 units

Value Point 1 -£1,492,418 -£1,458,590 -£1,307,517 -£1,199,603

Value Point 2 -£950,495 -£808,329 -£622,003 -£493,076

Value Point 3 -£376,810 -£154,578 £57,737 £196,311

Value Point 4 £186,244 £466,489 £700,368 £857,706

58 units

Value Point 1 -£357,830 -£315,518 -£235,971 -£70,681

Value Point 2 £436,086 £450,591 £542,797 £736,293

Value Point 3 £1,204,799 £1,238,027 £1,344,994 £1,569,095

Value Point 4 £2,021,018 £2,025,464 £2,147,192 £2,401,902

120 units

Value Point 1 -£261,532 -£219,407 -£141,491 -£113,577

Value Point 2 £418,312 £507,436 £610,906 £668,409

Value Point 3 £1,149,292 £1,260,617 £1,388,475 £1,470,604

Value Point 4 £1,880,272 £2,013,800 £2,166,044 £2,272,800

GL Hearn of 70


Colour Code





Scenarios 35% 30% 25% 20% 35% 30% 25% 20%

16 units

Value Point 1 -£1,734,832 -£1,587,062 -£1,435,989 -£1,274,337

Value Point 2 -£1,262,371 -£990,889 -£804,471 -£599,218

Value Point 3 -£710,128 -£349,234 -£130,616 £90,882

Value Point 4 -£159,040 £268,380 £502,263 £742,468

58 units

Value Point 1 -£545,675 -£516,829 -£410,129 -£206,644

Value Point 2 £119,381 £184,859 £312,910 £555,275

Value Point 3 £864,343 £952,366 £1,097,866 £1,374,503

Value Point 4 £1,648,892 £1,713,229 £1,877,074 £2,189,207

120 units

Value Point 1 -£516,465 -£420,530 -£310,095 -£247,668

Value Point 2 £113,266 £276,929 £388,355 £491,413

Value Point 3 £821,367 £975,224 £1,149,231 £1,280,332

Value Point 4 £1,521,842 £1,701,857 £1,904,544 £2,064,827

GL Hearn of 70

4. Apartment Development Appraisals

GL Hearn of 70

GL Hearn of 70

5. Additional Market Information

GL Hearn of 70

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