The value of housing design and layout

Table 4.8: Total build costs
42
RESEARCH RESULTS AND DISCUSSION
Perhaps of significance here is the way in which developers look at their finances. Few
nowadays look at the absolute profit made on a single site but most would look instead
at return on capital employed in the form of an internal rate of return (IRR). This has an
important impact on the ability of developers to discern how they are making their
money, whether it is the act of building houses or whether it is developing land that is
creating value on a site. The form of analysis used here has begun to suggest that it
may be the latter. Further robust investigation needs to be undertaken on more sites in
order to ascertain this.
Full details and analysis of build, site and marketing costs are contained in Appendix 2
but Table 4.8 summarises them.
Scheme Location Build costs: £000
Per hectare (acre) Per m 2 (ft 2 )
A Surbiton – exemplar 6,260 (2,533) 1,110 (103)
B Surbiton – conventional 4,467 (1,808) 1,006 (93)
C Bishop’s Stortford – exemplar 3,143 (1,272) 939 (87)
D Bishop’s Stortford – conventional 3,466 (1,403) 812 (75)
E Chelmsford – exemplar 2,761 (1,117) 852 (79)
F Chelmsford – conventional 2,418 (979) 812 (75)
G Aylesbury – exemplar 2,941 (1,190) 950 (88)
H Aylesbury – conventional 2,501 (1,012) 857 (80)
Source: FPDSavills
When measured on a per standardised hectare basis, the building costs of the
exemplar schemes are usually, but not always, higher than the conventional schemes.
The Surbiton exemplar scheme, A, cost nearly twice as much per hectare as its
matched pair, reflecting the fact that it was built at approximately double the density.
The exemplar cases at Chelmsford, E, and Aylesbury, G, both cost 18% more than the
conventional match. It is interesting to note, however, that the exemplar scheme at
Bishop’s Stortford cost less to build per hectare than the conventional example there,
despite the unit density being higher. This possibly reflects the high development
density (or mass) of the conventional scheme.
4.4 Values
4.4.1 Unit values
The notion that higher density decreases value was not supported by this study. In two
of the four cases, the value of the units in the higher density scheme was higher on a
per square metre basis than the comparable lower-density schemes (in one case,
substantially so). Clearly, there is a critical balance to be struck by the developer in
maintaining unit values while increasing density. Some developers managed to achieve
T H E V A L U E O F H O U S I N G D E S I G N A N D L A Y O U T