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consultancysoftwaretraining
development
User Group Meeting
2012
Agenda
• Introduction (this bit)• Company update• SDS ProVal• SDS Sequel• New Products• Private Development• Questions• Lunch• Open Workshop
Company update
• Staff changes• Training accreditation• Awards• International• advantageSDS
New Clients• Bespoke Properties Ltd• Bolton at Home• Bournemouth Borough Council• Central Bedfordshire Council• City of Bradford MBC• DP9 Partnership• Equity Housing Group Ltd• First Choice Homes Oldham Ltd• Guinness Northern Counties HA Ltd• Harrow Churches Housing
Association• Helena Partnerships
• Kift Consulting• Knight Frank• Liverpool Mutual Homes• Livin Housing Limited• London Borough of Ealing• London Borough of Hounslow • Lovell Partnership • Merlin HS• Network HG• Peabody• Swan Housing Group• Waverley Borough Council
Sales Forecast
UK Outlook
• Austerity until 2018?• Tiger Index gloomy• IMF to trim global growth forecast• No one knows!
UK Outlook
UK Outlook
* As at May 2012. Source: Marketline
Government Spending
11 © MarketLine This report is a licensed product and shall not be reproduced without written permission from MarketLine
Figure 5: United Kingdom homebuilding industry volume forecast: housing units, 2011–16
Sector Outlook
• Universal credit• Increased voids/bad debts• Change from RPI to CPI• Bond market strong• HRA changes kill off transfers?• Mortgages from pensions?• Stamp duty holiday through 4G auction?• Commercial not social?• Return of the housebuilders
SDS ProVal
ProVal in ExcelKnown issues to be addressed
oDefault ‘ProVal Appraisals’ folder not always selected on savingoClosing the appraisal sometimes requires to be done twiceoAffordable equity share not calculating
SDS ProVal
ProVal in ExcelInflation oProposing to update inflation data as soon as RPI information announced.oWill not wait for HCA formal confirmation.oRisk of HCA surprising us!oRPI/CPI position - awaiting further advice
SDS ProVal
ProVal in Excel
oNext update to follow after September RPI announcedoNovember
SDS ProVal
New Release 12.4.5 – this week.
SDS ProVal
oAddresses speed and usability issuesoChanged layoutoAppraisal opening time c. 20 secs.oReports updatedoUser Manual to be updated
SDS ProVal
oNew pricing structure for upgradingoApplicable 1st January 2013
SDS ProVal LS Pricing
oNew one-off upgrade charge, based on users.oCurrent ‘unlimited’ user licences will be honoured, but changing to a fixed number of users may be beneficial.oConfirm upgrade before 31st December to avoid the supply charge. oDefer implementation as suits you.
SDS ProVal LS Pricing
oSupport charge may increase, s.t. current number of modules in ProVal XL.oIndividual quotation available on request
SDS ProVal LS Pricing
oMinimum one day training for administratorsoMinimum half day Beginners plus half day Refresher/Advanced for end usersoAppraisal Appreciation seminar, optional
SDS ProVal LS Pricing
oSee Andrew Markham for a trialoUse our server remotely to trialoWebinar training offered for trials
SDS ProVal LS Pricing
oOverview, highlighting principal changes
SDS Sequel
• New release v6.1.8• New features• Updated user interface• Improved appraisal import• People section fields added
• Brixx v1.0.5• Option to aggregate tenure types
SDS Sequel
• Future updates for 2013• Scaleable cashflow manager• Disaggregation of multi-tenure appraisals• Updating of appraisal from Sequel
SDS Sequel
• Don’t forget…• Office Addins for Word/Excel/Outlook• Brixx Export Utility• Free reports
…all on the website: http://www.s-d-s.co.uk
SDS Sequel
SDS Sequel
• Support available online for all SDS products:• http://community.s-d-s.co.uk
SDS Sequel
• Overview, highlighting key changes…
New Products
New Products
• Sequel Mobile (iPhone & iPad)• Landval Mobile (iPhone & iPad)• Housing Development Manual• Savills/Rightmove AVM link• SDS HomeMatch• SDS IntelliStock
Sequel Mobile
Landval Mobile
Housing Development Manual
• Created and maintained by advantageSDS• Ideal for new build, refurbishment projects,
purchase of street properties and temporary social housing
• Easy to follow, step by step guide• Includes compliance checklists• Integrates with SDS Sequel• Available now!
Savills/Rightmove
• Link from ProVal to AVM website• Property details sent to AVM• Other details entered by user• Report data entered into appraisal• Report saved with appraisal• Due: November 2012
SDS HomeMatch
• Developed for sales/homebuy staff• Online property/customer matching• Property view or people view• Affordability sensitivity options• Emailing of property details to customers• Reporting• Due: January 2012, s.t.c.
SDS StockProfiler*• Uses RSR data, together with other data, to model your entire stock• Results will display tabular/graphical data showing data such as
tenure, size and type attributes, distribution and value (NPV).• Designed to be run frequently to analyse the stock in different ways• Data shown geographically on Google Maps• Due: April 2012 s.t.c.
Phase 2:• Automatically generated appraisals of stock options• Results summarised and ranked for review• Further refinements to the appraisal then possible
Private Development, Cross Subsidy & Mix Optimisation
David Shelton
Private Development
What is the key difference between speculative development and social housing
development ?
Private Development
RISK !
Selling properties is always the biggest risk with speculative development
Private Development
Estimating sales prices is not easy!
Small differences in prices have a disproportionate effect on land value, or profit
This is called the Gearing Effect
Private Development
In what other areas is speculative development different from social housing?
Private DevelopmentSize Matters oSmaller size for a given occupationoMore likely to under-occupy
Private DevelopmentDesign & SpecificationoDesign is different – more focused on enhancing value rather than reducing maintenance costs
Private DevelopmentDesign & SpecificationoThe private market is not uniform – different product designs for different market sub sectors.
Private DevelopmentDesign & SpecificationoPrivate buyers have free choice and the main competitor is the second hand market
Private DevelopmentProcessoPrivate sector developers are fiercely competitive when buying land. oAchieving maximum land value is the first objective
Private DevelopmentProcessoTight control over building costso‘Standard types’ allow accurate estimating
Private DevelopmentProcessoPrivate developers do not build all the units in ‘one contract’oEach dwelling is a mini building projecto‘Work in Progress’ is tightly controlledoCashflow similarly strictly controlled
Private DevelopmentProcessoTiming is criticaloMore disciplined on decisions – oPrivate developers are less likely to change their mind
Private Development
Popular fallacies believed by housing associations about speculative
development?
Private Development
Building for speculative sale is the same as building for shared ownership
Different markets Different products Different pricing strategyDifferent customer profileDifferent marketing strategy
Private Development
If we don’t sell it we can let it
Dwellings for private sector not usually acceptable for social letting
May not be viable for market rental
Space and specification are different
Private Development
We can let a fixed contract for the works just like we do for other social housing schemes
Units need to be built as separate individual projects
Private Development
If Barratts can do it, why can’t we do it ?
You require…Specialist knowledgeRelevant experience
It needs…A different kind of controlA different management processA different business model
Cross Subsidy
Cross subsidising social housing from speculative housing?
Cross Subsidy
Don’t spend the profit before you’ve made it!
Retain some profit as a contingency on sales prices
Cross Subsidy
Don’t under value LCHO units as a way of reducing risk
Dwellings priced at £x will get sold at £xThe purchaser reaps the under selling
Use realistic prices and costs
Cross Subsidy
Don’t under value LCHO units as a way of making them affordable
Affordability checks are a key viability indicator for the housing association.
Cross Subsidy
Show all contingencies and risk provisions explicitly in the appraisal – don’t hide them in other inputs.
Understanding the true risk and how that has been dealt with in the appraisal is essential
The Gearing Trap
The Gearing Trap
The Gearing Trap
o A small change in sales prices leads to disproportionate change in land value.
o Similarly, once the land cost is fixed, a small change in sales prices leads to a disproportionate change in profit margin.
The Gearing Trap
o A small change in sales prices leads to disproportionate change in land value.
o Similarly, once the land cost is fixed, a small change in sales prices leads to a disproportionate change in profit margin.
Gearing
Effect of Sales Change on Land Value
Increase SV Decrease SVSales Price 250,000 262,500 5% 237,500 5%
Build 125,000 125,000 125,000
GM% 20% 50,000 52,500 47,500
Land Value 75,000 85,000 13% 65,000 -13%
Sales Value Sensitivity
Effect of Sales Change on Profit
Increase SV Decrease SVSales Price 250,000 262,500 5% 237,500 5%
Build 125,000 125,000 125,000
Land 75,000 75,000 75,000
Gross Margin 50,000 62,500 25% 37,500 -25%
Gearing
Sales Value Sensitivity
Mix Optimisation
Changing mix to maximise land valueand maximise cross subsidy
Mix Optimisation
Assume a 1 acre plot of land
What mix of units achieves the best land value ?
Mix Optimisation 2-bed 3-bed TOTAL
Floor area 70m² 80m²
Sales Price £250,000 £275,000
Build cost £77,000 £84,000
Number of units which can go on one acre (plotting density)
15 12.5
Mix A 8 5 13
Mix B 4 8 12
Mix C 10 3 13
Mix D 3 9 12
Mix Optimisation 2-bed 3-bed TOTAL
Floor area 70 80
Sales Price £250,000 £275,000
Build cost £77,000 £84,000
Number of units which can go on one acre (plotting density)
15 12.5
SP less Build cost 173,000 191,000
Mix A 8 5 13
Mix B 4 8 12
Mix C 10 3 13
Mix D 3 9 12
Mix Optimisation 2-bed 3-bed TOTAL
Floor area 70 80
Sales Price £250,000 £275,000
Build cost £77,000 £84,000
Number of units which can go on one acre (plotting density)
15 12.5
SP less Build cost 173,000 191,000
Value per acre 2,595,500 2,387,500
Mix A 8 5 13
Mix B 4 8 12
Mix C 10 3 13
Mix D 3 9 12
Mix Optimisation 2-bed 3-bed TOTAL
Floor area 70 80
Sales Price £250,000 £275,000
Build cost £77,000 £84,000
Number of units which can go on one acre (plotting density)
15 12.5
SP less Build cost
173,000 191,000
Value per acre 2,595,500 2,387,500
Total Land (acs)Mix A 8 5 13 2,339,000 0.93Mix B 4 8 12 2,220,000 0.91Mix C 10 3 13 2,303,000 0.91Mix D 3 9 12 2,238,000 0.92
Mix Optimisation
Result
Mix A £2,339,000Mix B £2,220,000
£119,000 between best and worst!
Achieved by mix aloneOn 1 acre
Mix Optimisation
Mix Optimisation
oMaximise Land Value
oMaximise Profit
oMinimise Grant
But, you must have freedom to vary mix
Questions and Feedback
The Audience!
01483 278444www.s-d-s.co.uk
contact us
Thank you for your time
