Over the last couple of years Barratt has focussed on building more homes from our existing land pipeline. Increased site efficiency through improving density and coverage has been the key vehicle and so far the results have been encouraging. In FY16 we managed to secure several hundred extra units from our larger existing sites simply by reworking the layout whilst we are building out the early phase. Thus avoiding any cost prohibitive delays to the build programme.
So why the current focus on more 2 and 3 bed homes at the expense of larger units?
Three key reasons:
Firstly two key shifts in the mortgage market have played into the delivery of more smaller units. Namely the easing of restrictions on new-build flats outside London and some new attractive long term fixed rate loan products. These changes, alongside Help to Buy, have much helped younger and lower income customers to enter the market. Indeed the recent 2016Q3 analysis by Nationwide made the point that (apart from in London and the SE) smaller new build homes are now more affordable than in 2006. We want to get a share of that market. If Starter Homes mean that new owner occupied homes are brought onto the market at 20% discount the position for purchasers of smaller homes could ease further.
Secondly it is obviously more commercially attractive to secure additional sales and revenue by driving extra floor space and units from an existing site than from a brand new one. Thus avoiding the extra land spend, planning and site set-up costs.
And finally both the market and Government are pushing us to build faster and at higher density. In May this year HBF Members (including Barratt) signed a formal agreement with the Government to speed up build on all larger sites. Looking solely at our larger sites above 350 units we are now forecasting an extra 500 units from this source in FY17. With similar increases for FY18.
A simple example is Watling Street in Milton Keynes. We deployed extra build and sales resources, dual-branded the development, increased density and brought forward a later phase with LA agreement. As a result sales targets have increased by over 30%. Additional revenue, faster revenue, and more homes from the same land.
Recent design changes to our range will further help us to increase our average density. For example we have introduced brand new smaller David Wilson products which will drive coverage and sales rates on those sites. Whilst the new Barratt low-rise flats will prove highly attractive to both FTBs and the increasing +55 downsizer market.
So we are doing our bit to accelerate delivery. But we face often face barriers and delays to increasing site yield if we need to secure a new planning permission. Such risks generally dissuade us from maximising site efficiency and therefore changes to planning policy to make it far easier to increase site yield after outline consent would make a huge difference. Its a very simple change – simply re-introduce the 2010 DCLG guidance on Greater Flexibility for Planning Permissions. This was also recommended in a previous blogpost CLICK HERE which, encouragingly, was endorsed by leading panning solicitors and barristers (Simon Rickets, Killian Garvey) as being a meaningful and feasible change.
With such a policy change in place we would take more steps to deliver greater number of additional homes from our existing land pipeline, capitalising on the current tailwinds from customers and their lenders.