Bitpipe Posted February 20, 2017 Share Posted February 20, 2017 https://www.theguardian.com/business/2017/feb/20/bovis-to-pay-7m-to-compensate-customers-angry-at-poorly-built-homes Link to comment Share on other sites More sharing options...
ProDave Posted February 20, 2017 Share Posted February 20, 2017 That's an interesting article in many ways. not the main thrust of it, but from that I glean they made £175m in 2016 from building 4000 homes. Unless my decimal points have gone astray, I make that £38,500 profit per house. Whoever blamed high prices on the builders? I presume that factored in the land cost in arriving at that profit. so after buying the land, building the houses they make just £38K per house. As I have said before, there is no money to be made in building houses at the moment. Link to comment Share on other sites More sharing options...
Jeremy Harris Posted February 20, 2017 Share Posted February 20, 2017 £38k per house is a bit more than the build profit most mass house builders will admit to. Most seem to reckon they work on margins of around 8% to 10%. At a guess, I'd say that the average price of a new house could be somewhere around £250k to £280k, so the Bovis profit looks to be on the high side. My guess is that they make most of their profit on land value uplift, though, rather than building houses. I've no doubt the homes are of a poor quality, that's par for the course with a great many big builders, but this story seems to be about them wanting to get cash on their books before the end of their company FY, which seems to be December for them (as it is for a fair few companies now). It looks like the applied pressure to get people to move into incomplete homes just to boost their completed sales figures for that financial year. In the light of their profits warning this seems understandable, even if it is a pretty grim way to behave. Link to comment Share on other sites More sharing options...
Ferdinand Posted February 20, 2017 Share Posted February 20, 2017 (edited) Hmmm. Average Bovis selling price in 2016 Q1 and 2 was 254k, so 250-280 will be spot on now. They are making a pretty good margin compared to other big builders. http://www.bovishomesgroup.co.uk/pdfs/interimresults2016.pdf One interesting one to me is their cost per consented plot is £50k, and they are Southern-biased in where they build. Another is that they spent £56.8m on Section 106/CIL and £31.8m on Education planning gain taxes in 2015, plus whatever they spent on building 848 affordable homes. I am loving some of the diagnoses of the cause of the problem in the Guardian comments. Loving the picture of half finished tiling in the kicthen, and the comments about holes in the roof. Bovis Homes down by 10% on the shares. They will be back - good time to invest :-). F Edited February 20, 2017 by Ferdinand Link to comment Share on other sites More sharing options...
ProDave Posted February 20, 2017 Share Posted February 20, 2017 So they can get a consented plot for £50K and make £38k building a house on it. Why not sell it to self builders for £100K per plot (probably cheap for the south) and forget all this house building stuff? Seriously, I can't understand why there is not a move for mass developers to sell a couple of self build plots per development. They would probably want to leave selling those until the end of the development so whatever anyone does with them won't impact the sales of their main development. Link to comment Share on other sites More sharing options...
Jeremy Harris Posted February 20, 2017 Share Posted February 20, 2017 It's a nice idea, but the planners tend to throw a spanner in the works down here. It was suggested a while ago and the developer concerned was very keen indeed, but it was vetoed by the planners on the grounds that the self-builds may not fit the new development "street scene" and that the timing of them could be subject to delay, leaving the other residents of the new development living close to an active building site.......................... A couple of years ago a developer bought a field belonging to my neighbour, subject to them getting planning consent. They did eventually get planning consent, after making a large S.106 agreement (for something the village can't actually spend the money on, so they will get it back....................) and they still haven't started work on building the 28 houses, more than 2 years after they were granted consent. 30% of the development are "affordable homes" and their argument at the planning meeting was that there was "an urgent need for affordable housing in the village". We now have Bovis putting in an application for 50 homes on another field at the edge of the village, and, guess what? They are arguing that they should be granted planning permission because there is still an urgent need for "affordable homes" in the village. I have a rough idea of what the first developer paid for the land; around £20k per plot, plus planning costs. At a guess the cheapest "affordable homes" will be around £260k, the top of the range homes at the other end of the development, 4/5 bedrooms, will be around the £550k to £700k mark. Link to comment Share on other sites More sharing options...
Bitpipe Posted February 20, 2017 Author Share Posted February 20, 2017 Reading the comments, a lot of people put huge faith in the NHBC warranty and belief that each unit is inspected and signed off - we know that BC look at 1 in 10 max per development. My overriding thought was if those are the defects you can obviously see, what on earth is now hidden from sight - guessing shocking levels of insulation and cold bridging that will only become apparent after a few years occupation. Link to comment Share on other sites More sharing options...
Steptoe Posted February 20, 2017 Share Posted February 20, 2017 3 hours ago, ProDave said: That's an interesting article in many ways. not the main thrust of it, but from that I glean they made £175m in 2016 from building 4000 homes. Unless my decimal points have gone astray, I make that £38,500 profit per house. Whoever blamed high prices on the builders? I presume that factored in the land cost in arriving at that profit. so after buying the land, building the houses they make just £38K per house. As I have said before, there is no money to be made in building houses at the moment. its obviously changed quite a lot, in the past the general consensus was that every 4th house was 'free' that is, the cost of building the 4th house was covered by the sale of the first 3, so whatever the 4th house sold for was the profit, Link to comment Share on other sites More sharing options...
SteamyTea Posted February 20, 2017 Share Posted February 20, 2017 Shame that the owners set up a facebook page, I won't be bothering to read that. I did see a picture of some plumbing in the Guardian article. Is that the main problem? Or is it general 'finishing' rather than structural stuff? Link to comment Share on other sites More sharing options...
Triassic Posted February 20, 2017 Share Posted February 20, 2017 4 hours ago, ProDave said: As I have said before, there is no money to be made in building houses at the moment. Really, I know of two small developers, both live in large detached properties in very nice areas, one even has his own helicopter and a Ferrari! Mind you the Bovis profit margin could just be fake news. 1 Link to comment Share on other sites More sharing options...
ToughButterCup Posted February 20, 2017 Share Posted February 20, 2017 People this is FAKE noos, very bad Guardian reporters. Bovis inherited a mess. Give the builders a break. #makeBOVISgreatagain 1 Link to comment Share on other sites More sharing options...
SteamyTea Posted February 20, 2017 Share Posted February 20, 2017 (edited) 15 years or so ago, I had a conversation with my then girlfriend's father, who described himself as a property developer (whatever that actually is). The conversation came about because he had a bit of land just outside Hemel Hempstead that he had bought about 10 years earlier, got planning permission on it for a few houses (4 I think) and needed to renew the permission or start building. I suggested that he just sell the land as spending money building some houses on it would make him less money overall. He did not agree as he thought that the 'hard work of building' was what put the value into land. I then asked him to put some numbers on it all, which he could not, so I showed him some figures for general house inflation (was about 4% a year then I seem to remember). I then asked him how much it would cost to build these houses and he seemed to think that they would be about £50,000 each (so around £200,000). He got the land valued and found that I was right and he would be better off selling the land. What he had done, in his mind, was forget about the relatively low price he had paid for the land (without planning) and just looked at the difference between the cost of building some houses and what he could sell them for. Strange how some people cost things out, but I suspect that it is not that uncommon. Edited February 20, 2017 by SteamyTea Link to comment Share on other sites More sharing options...
MikeSharp01 Posted February 20, 2017 Share Posted February 20, 2017 4 hours ago, JSHarris said: My guess is that they make most of their profit on land value uplift, though, rather than building houses. I suspect you would need to look at their annual accounts to get a true picture, my guess is that the land profit (IE rising price of their land bank) is taken each year as part of their asset register and written down or up, but it could be 'handled' in a number of ways on their books. I think that means dividing the profit by the number of houses built is at best approximate because they can 'adjust' the way the undeveloped land bank value is treated to suit their needs. 1 Link to comment Share on other sites More sharing options...
MikeSharp01 Posted February 20, 2017 Share Posted February 20, 2017 19 minutes ago, recoveringacademic said: People this is FAKE noos, very bad Guardian reporters. Bovis inherited a mess. Give the builders a break. #makeBOVISgreatagain @recoveringacademic Is this bluff, double bluff or just guff ... are we in danger of creating the impression that the big house builders need to be defended by the little ones - you and me, or were you poking some fun.... trouble is pretty soon nobody will know what is fake and what is not. Link to comment Share on other sites More sharing options...
Ferdinand Posted February 20, 2017 Share Posted February 20, 2017 (edited) Not fake news, but poor PR. This has been brewing for a year at least. Plenty of opportunities to sort it. I am sure there are a few free riders - but a group of 1400 for an annual output of 4000 homes is a lot. Back in December it was only 600. It seems that the trigger for wider coverage was a profits warning, followed by a Hail Mary Pass compensation offer following on from badly designed incentive payments to building staff. Twitter account set up in Feb 2016, for example: https://twitter.com/boviscomplaint?lang=en Edited February 20, 2017 by Ferdinand Link to comment Share on other sites More sharing options...
ToughButterCup Posted February 20, 2017 Share Posted February 20, 2017 It was Trumped Up from the bottom of my id, Mike. Alternative Fact at best, cods wallop at worst. But normal for across the pond eh? Link to comment Share on other sites More sharing options...
TheMitchells Posted February 20, 2017 Share Posted February 20, 2017 Can anyone give a rough guide on how much of an uplift in price the developers get when they buy the land and then get planning? Link to comment Share on other sites More sharing options...
Jeremy Harris Posted February 20, 2017 Share Posted February 20, 2017 2 hours ago, TheMitchells said: Can anyone give a rough guide on how much of an uplift in price the developers get when they buy the land and then get planning? It depends a great deal on the circumstances. For example, around 20 years ago a developer bought a swathe of farmland outside a nearby town, that was well outside the development boundary. they paid an agricultural land price for it, at that time probably around £3k to £4k per acre or so. They rented it out as farmland and sat on it, then many years later, when the planning policy changed (with, I suspect, more than a little influence from the developer........) a large (as in several hundred houses) plan was approved. I reckon that paid around £500 per plot, so their uplift was around 100 times the purchase price, but over a fair period of time, around 15 years or so. On the other hand, my neighbours field was bought for around £20k per plot, so the uplift was only about 2.5 times the purchase price, but the developers bought it with a condition that the sale would only complete after they'd got PP. In general, the uplift from agricultural land price to building plot land price is usually around 50 to 100 times, hence the motivation for speculative land purchases around areas predicted to grow. 1 Link to comment Share on other sites More sharing options...
SteamyTea Posted February 20, 2017 Share Posted February 20, 2017 3 hours ago, TheMitchells said: Can anyone give a rough guide on how much of an uplift in price the developers get when they buy the land and then get planning? Savills have a bit of info (watch the scale): http://www.savills.co.uk/research/uk/residential-research/land-indices/development-land-index.aspx And there is also this: http://eureka.sbs.ox.ac.uk/5365/1/2015-8.pdf Link to comment Share on other sites More sharing options...
Bitpipe Posted February 23, 2017 Author Share Posted February 23, 2017 A follow up opinion here - not news to us but calls out the conflict between the skills available in the market and the government desire to build housing, plus a slack inspection regime and coziness between NHBC and developers. https://www.theguardian.com/commentisfree/2017/feb/23/building-millions-new-homes-not-fit-to-live-in-regulation Link to comment Share on other sites More sharing options...
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