Nsbrc partner event 4th june 2013 build store presentation - raymond connor


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Self Build sector view by BuildStore, established market, new opportunities in the custom build sector, BuildStore and NSBRCs role.

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  • Points 1 + 2 + 3: This compares to around 18,000 self builds in 2006/07, when the market was experiencing its highest levels of output – all indications are that the established market will continue to grow, with the backing of Government (These figures are adjusted for those who do not reclaim VAT; Include all home building projects – conversions & new builds; not renovations/home improvement). Just under 109,000 private new homes were completed in the UK over that same period. Self build homes account for around 11% of all new homes being built currently, but the biggest difference is that self build homes are not speculative, unlike those churned out by the housebuilders Point 4: This compares to an average of 6000 plots in 2006/07, which grew to around 9,000 in 2009/10 – plot prices have also fallen by around a third since 2009, with average prices in England around £240,000 Point 5: Most self builders will need finance to help them with their project, and we estimate that 60% of them, around 7,000, will need a mortgage – as the market grows, this requirement will also increase, as most homeowners have seen the equity in their home drop 10% – 15% over the last few years, therefore, their borrowing needs will be higher Point 6: Crucially, the nature of the self build model allows the self builder to retain what would normally be the developers profit as immediate in-built equity, so the money they save by procuring the house themselves results in a low end LTV – typically less than 60%
  • The graph shows that while over 55% of people are motivated by the opportunity to save money, by far the biggest appeal of self build lies in the opportunity to design and create a house that is suited to them, backed by the fact that 42% of people cited a dissatisfaction with homes on the existing market as a reason for choosing to self build.
  • This just covers the emergence and drivers for a new model/market Last 2 points is where Simon M will pick up – this will lead him to talk about the route to self build policy, touching on: Housing Strategy – Laying the Foundations; NPPF; Pipeline projects from local authorities, Housing Associations, HCA, developers, etc
  • All these issues were taken on board and a series of steps were taken to implement the changes required. Laying The Foundations Document was published in November 2011 more emphasis on Community led Planning and design. the localism act enables communities to take control and receive more of the benefits of growth and development in their neighbourhood. Essentially it will and has enabled local authorities to take the initiative rather than being driven by regional strategies. Community Right to build was established enabling individual communities to enable development the way they want it delivered. It’s an especially useful vehicle for Community Land Trusts who in conjunction with self build are an effective affordable housing model and enabling developers are seeing it as a useful strategy to deliver affordable homes. The NPPF which was published just under 12 months ago. Crucially it addresses people wishing to build their own homes which means local authorities have to do two things. 1: Strategic Housing Market Assessment (SHMA) make it necessary to assess their full housing needs and to ensure that this identifies the scale and mix of housing and the range of tenures that the local population is likely to need over the plan period. Importantly, this need includes the need for housing by people who wish to build their own homes. They then have to create a Strategic Housing Land Availability Assessment (SHLAA) to establish realistic assumptions about the availability of land to meet the identified need for housing over the plan period. This will now include self build. 2 The framework asks local planning authorities to use their evidence base to ensure that their Local Plan meets the needs for market and affordable housing and (at Para. 50) to deliver a wide choice of high quality homes, widen opportunities for home ownership and create sustainable, inclusive and mixed communities, by planning for a mix of housing based on current and future demographic trends, market trends and the needs of different groups in the community, including people wishing to build their own homes. The policy’s reference to self build housing in the assessment is a major breakthrough and is starting to generate results but that is creating a call to action for Lenders. We have seen an encouraging trend from proactive local authorities to promote self build opportunities in their areas through a variety of means, and more are coming on stream all the time – for example Swindon, Stoke on Trent, Cherwell, Derby, Teignbridge. In many cases they are making sites available as part of their initiatives, or working with social landlords to bring multi-plot self build schemes to fruition. Some promote self build as part of their local policies – for example Cornwall and Shropshire. HCA Now has a clear strategy for making its land disposals available to multi site self-build projects working with Enabling developers. Much clearer guidance has been produced to help these enabling developers bid for the land successfully and projects are coming to fruition following workshops. HCA is also encouraging developers to make areas within its larger sites available for enabled self-build development. A revolving fund has been established to help fund some of the enabled development costs on these projects and NasBA actively promotes the Custom Build model to developers and land owners looking to bring projects forward that otherwise could not due to limited project funding. NaSBA is holding regional workshops to ensure the methods of delivering on their NPPF requirements are clearly understood – generating much more awareness. While this doesn’t cover all the areas NaSBA has been working on it’s these key mechanisms which are promoting the responses we are seeing now, (Raymond to pick up) Essentially the message from the industry as a whole is that while the custom build opportunities have been created and are happening now - the lending sector now needs to respond to these opportunities and provide the specific solutions required by the consumer.
  • Nsbrc partner event 4th june 2013 build store presentation - raymond connor

    1. 1. A View of theSelf Build MarketRaymond ConnorBuildStore Financial Services
    2. 2. Agenda• The Established Self Build Market• The Evolving Market for Self Procurement• BuildStore in the Self Build Market
    3. 3. The Established Self Build Market• 11,870 self build homes completed in the year to September31st 2012 (Homebuilding & Renovating, December 2012)• This represents almost 11% of all new private homes built inthe same period (DCLG, 2012)• Currently in excess of 10,000 self build plots for sale, highestlevel in over a decade (PlotSearch 2013)• A completed self build home is typically worth 20% – 25%more than it cost to build, providing instant equity• Research shows that the choice for design, customisation &specification is the main motivator for undertaking a self buildor renovation project (DLG, 2011)• A third will spend over £300k; 45% will spend £150k- £300k(DLG, 2011)
    4. 4. The Established Self Build MarketWho Self Builds?• 55% are aged 35 – 55• Average household income: £72,000• Most are 3rdor 4thtime mortgage holders• 20% own more than one property• The highest proportion of self builders can be found in SouthEast, South West and ScotlandSource: DCLG Survey of BuildStore customers 2011;BuildStore Mortgage customers, 2010 - 2012
    5. 5. The Established Self Build MarketWhat motivates people to self build?Source: DCLG Survey ofBuildStore customers 2011
    6. 6. The Established Self Build MarketTypical budgetBreakdown
    7. 7. The Established Self Build MarketSelf Build Output• 35% self project manage & use sub-contractors• 65% of homes have 4+ bedrooms• Average size = 218m² (UK average = 104m²)• 45% are build using Timber/Oak frames• 50% are built with brick & block• Growing interest in eco products & technologySource: BuildStore TradeCard Customers
    8. 8. The Established Self Build MarketFunding Self Build Projects• 60% of self builders need a mortgage to fund their project(BuildStore, 2011)• Lending market dominated by Building Societies• 25 Mortgage Lenders offering self build & renovation finance• Up to 85% borrowing on project costs (through BuildStore)• Exclusive advance stage payment mortgages available• Finance available direct from lenders and throughintermediaries and brokers• Interest-only repayment options to help cash flow of self builder• Pre-agreed stage payments to suit clients costs throughout thebuild
    9. 9. The Established Self Build MarketSummary• Steady, continued growth predicted, driven by individual need& ambition – One in three people would like to build their ownhome in the next five years (Norwich & Peterborough BuildingSociety, July 2011)• Dominated by homeowners, aged 35 – 55• The opportunity to ‘customise’ is the biggest driver• Not speculative – provides homes that people want, wherethey want• Supports construction industry with jobs & materials spending• Backed by Government policy & aided by planning changes• Supported and represented by national lobbying group(NaSBA)
    10. 10. The Evolving Market for Self ProcurementWhere is the market potential?• Short-fall of 150,000+ homes every year to meet demand• Slow moving housing market• Restricted mortgage market• House prices creeping back up• Speculative build model discredited• Generation Rent – FTB’s who want to get on the ladder
    11. 11. The Evolving Market for Self ProcurementThe Custom Build Homes Solution• Cited by BuildStore – ‘Self Build Moving Centre Stage’, 2008• Bringing large multi-unit sites with serviced plots to market,delivered by a local enabling developer• Partnerships between Local Authorities, Landowners,Housing Associations, lenders, contractors and developers• Alternative for Urban & Suburban communities• Localism agenda in action – Local authorities & Communitiesnow in control• Government policy to support self procurement market &increase output• Filling the gap between new build and self build – best of bothworlds
    12. 12. The Government’s Role• Public Land Release Programme underway• Housing Strategy Published– Community Right to Build• NPPF– Strategic Housing Market Assessment• HCA– Now identifies specific sites for multi-plot self-build• Housebuilders, Developers & suppliers– Enabled Development Model• Revolving Fund for initial development costs• Local Authority Planning Guidance & WorkshopsThe Evolving Market for Self Procurement
    13. 13. The Evolving Market for Self ProcurementWhat’s happening now?• 2,000 proposed self build homes in the pipeline from localauthorities• 20+ Housing Associations proposing self build options• 12 HCA Sites with self build plots• Housebuilders & developers looking at self build provision onnew schemes• Plus many more sites already underway…
    14. 14. The Evolving Market for Self ProcurementWindmill Green, SwindonSwindon Borough Council25 plots for detached selfbuild homes, in two phasesCustomisation & self finishoptions
    15. 15. The Evolving Market for Self ProcurementCarr Lodge, DoncasterKeep Moat HomesA large site for 330 newhomes, plus 30 plots forself build homes
    16. 16. The Evolving Market for Self ProcurmentLancasterH2O Urban,A joint venturebetween the Canal andRivers Trust, andprivate developer blocThe canal-side site willaccommodate 14housesPre-approved designswith flexiblecustomisation
    17. 17. The Evolving Market for Self ProcurementBenefits of the Custom Build Model•Self build on a volume scale•Best land values for landowners•Quality, well-designed homes, built to order•Opportunities for local suppliers & contractors•Customers supported throughout scheme•Lenders have responded positively•No need for development or revolving loans•Government backing
    18. 18. BuildStore in the Self Build Market• Established as the leading self build finance brokers• Land division offering the largest selection of plots,renovation and conversion opportunities• Project Support via a network of project managers• Industry-wide recognition of expertise• Assisting national and local government with self buildpolicy & schemes