RICS Modus, Global edition — April 2012

THE MONEY ISSUE

rics.org/modus

NEW HORIZON The future for an altered lending landscape p14BRIGHT IDEAS Innovative examples of project cost saving p26RIP PFI Is it time for a new private sector investment model? p36

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Regulars04_FEEDBACKYour views on Modus and the profession, and the latest poll

06_INTELLIGENCEGlobal news, plus opinions, reviews and reactions

35_LAW ADVICEProposed changes to real estate investment trusts

41_BUSINESS ADVICEHow to go about applying for business lending

Features14_THE MONEY MACHINEA look at the ever-shifting landscape of mortgage lending in the UK 20_SELF BUILDOpportunities for surveyors in the custom-homes sector

24_TOP TIERThe world’s leading locations for commercial property investment

26_10 MONEY-SAVING IDEASInspiring examples from the built environment of how to improve the bottom line

32_10 MINUTES WITH…Chris Brown FRICS, CEO of Igloo Regeneration

36_PRIVATE FINANCEHave the current PPP and PFI models had their day?

In formation43_RICS NEWSNews and updates, plus a message from the President

51_EVENTSTraining and conference dates for your diary

55_RECRUITMENTThe latest job opportunities from across the industry

58_THE MEASUREHouse prices and ownership worldwide

Contents NO 1604.12 //

THE MONEY ISSUEThey say necessity is the mother of invention, and the economic challenges of the

past few years have forced us all to innovate and improve effi ciency. This month,

we round up 10 inspiring examples of projects that have made substantial cost

savings (page 26), and look at the opportunities offered by the burgeoning self-

build sector (page 20). The fi nancial landscape of buying and selling houses has

shifted signifi cantly since the credit crisis – this issue’s lead feature (page 14)

considers the positive consequence of a more stable, considered mortgage market.

Elsewhere, we question the future of PFI as a viable procurement method (page 36),

meet a chartered surveyor involved in a sustainable regeneration fund (page 32) and

explore the world’s top locations for commercial real estate investment (page 24).

VICTORIA BROOKES EDITOR

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FOR SUNDAYEditor Victoria Brookes // Art Director Christie Ferdinando

// Contributing Editor Brendon Hooper // Sub Editor

Samantha Whitaker // Creative Director Matt Beaven //

Account Director Stephanie Hill // Commercial Director

Karen Jenner // Commercial Manager Lucie Inns // Senior

Sales Executive Faith Ellis // Recruitment Sales Managers

Grace Healy and Dorlisa Purkiss // Managing Director Toby

Smeeton // Repro F1 Colour // Printers Woodford Litho

and Ancient House Press // Cover Stuart Daly

Published by Sunday, 207 Union Street, London SE1 0LN

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FOR RICSEditorial board Ian Fussey and Jaclyn Dunstan

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Feedback//

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JOIN THE DEBATE

:EMAIL YOUR FEEDBACK TO [email protected]

Views expressed in Modus are those of the named author and are not necessarily those of RICS or the publisher. The contents of this magazine are fully protected by copyright and may not be reproduced in any form without the prior permission of the publisher. All information correct at time of going to press. All rights reserved. The publisher cannot accept liability for errors or omissions. RICS does not accept responsibility for loss, injury or damage or costs that result from, or are connected in any way to, the use of products or services advertised. All editions of Modus are printed on paper sourced from sustainable, properly managed forests. This magazine can be recycled for use in newspapers and packaging. Please dispose of it at your local collection point. The polywrap is made from biodegradable material and can be recycled.

92,028 average net circulation 1st July 2010 – 20th June 2011

THE MODUS POLL :SHOULD PFI/PPP STILL BE EMPLOYED AS A FINANCING METHOD FOR PUBLIC SECTOR PROJECTS?Total votes: 403

Visit rics.org/modus now to vote in our next poll: ‘Where should governments be focusing investment in transport infrastructure?

Due to the volume of correspondence we receive, we regret that we are unable to print all letters or respond to every one individually.

specifi c sustainability criteria such as the Code for Sustainable Homes and BREEAM, will invariably be detrimental to the natural environment, and so to aggregated sustainability criteria, through habitat loss, embodied energy, energy in use, transport etc, and that environmental impacts per person are signifi cantly reduced by living in larger households, as much less heating energy per person is needed, for example. The perceived housing crisis may well be a political/economic issue rather than one of housing numbers. Meanwhile, for economic activity, there are more than 20m homes that probably need maintaining, upgrading and retrofi tting.Dr Brian Pilkington MRICS, University of Plymouth

MEASURED RESPONSETo comment on Sally Anne Longden’s thoughts [in the Feedback section of the March issue] about the metric system, I must take you back to 1950 when, as a pupil

quantity surveyor, I spent my working day struggling with duodecimals. Without any type of calculators, we all became excellent at mental arithmetic. To illustrate my thoughts, I off er you a little challenge: how many square feet is the result of three feet two inches multiplied by eight feet fi ve inches? Please note you are not allowed to cheat as you have only a pencil and paper, and reducing inches to a decimal of a foot is not allowed. Maybe you have begun to change your mind?

In 1950 the world was a very different place, with all sorts of archaic imperial measurements still being used. Pounds, shillings and pence were not metricated (and that included ha’pennies and farthings), steelwork was measured in tonnes and hundredweights, we still had bulk structural timber in super feet (timber reduced to one-inch thickness regardless of its scantling), and let us not forget squares, acres and rods. If you really want a return to imperial measurement, be careful what you wish for.Richard Burton Jacob FRICS, Australia

A TRUE CRISIS?In response to Andrew Heywood’s ‘Social imbalance’ article in the March issue of Modus, can we be certain there is a housing crisis in terms of housing numbers, as is so often assumed since Kate Barker’s housing review? It should probably be borne in mind that the Barker report was commissioned by and for the Treasury, rather than to seek housing solutions per se. Andrew flags up the number of housing completions between 1980 and 2010 as being only 5m, a lower rate than the post-war period. National Statistics show that the population (rather than households) increased by 5.4m over the same period, so 5m might seem quite reasonable. There are currently around 800,000 empty homes; there may be anywhere between 500,000 and 1.5m second and holiday homes; possible floorspace for 1.5m homes in existing redundant or empty commercial property; and the results of a DETR [Department of the Environment, Transport and the Regions] survey towards the end of the 20th century identifi ed 400km2 of derelict land.

It may be that we don’t need any new estates on greenfi eld land and we don’t need as many houses as often claimed, unless for their contribution towards economic activity. It may be possible that housing demand could be reduced signifi cantly (ie housing crisis averted) and social cohesion increased by offering fiscal and cultural incentives to encourage larger households, such as extended family living. We know that new houses and loss of greenfield and natural land, even when complying to

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Intelligence :NEWS :REVIEWS :OPINIONS :REACTIONS

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Twelve years after architect Renzo Piano first envisioned a ‘shard of glass’ skyscraper rising from the Thames, a new pinnacle for UK construction has pierced the London skyline. Due for shell and core completion next month, the 310m, 95-storey Shard will officially become the tallest building in the UK and the EU – but will still rank only 46th in the world. Inspired by the spires found in Canaletto’s paintings of London, Piano created the tower’s original sketches in 2000, and later developed its stable pyramid structure in light of a report into the collapse of the World Trade Center. However, it wasn’t until March 2009 that construction really got under way, following negotiations with Network Rail and a tricky demolition job of existing buildings on the site. For an estimated cost of £400m, the Shard has been developed by a diverse project team including Sellar Properties and Mace, with project management from Turner & Townsend, quantity surveying from Davis Langdon, and structural and services engineering from Arup and WSP. Steve Watts MRICS, head of tall buildings for Davis Langdon, has been involved since 2002. He says the biggest construction challenge has been a financial one – to make the project as cost effective as possible. ‘We’ve had to maximise economies of scale – for example, we found ways of saving money on the thousands of louvre windows.’ Does he think the Shard will inspire people to build increasingly higher in London? ‘Rather than “taller and taller”, I believe it will make people think more about innovative mixed-use, because the tapering form is a very efficient structural system for its variety of uses. It may be the tallest building in the EU, but it’s actually a very cost-effective project.’the-shard.com

:THE SHARDLONDON BRIDGE QUARTER

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Intelligence//

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The path to consistent sustainable real estate is moving at diff erent speeds across Europe, warns an Offi ces 2020 report by Jones Lang LaSalle (JLL). ‘A clear example of enforced change is the UK’s 2011 Energy Act,’ said Bill Page, director of EMEA research at JLL. ‘From April 2018, landlords will be unable to let out

residential or business premises below a minimum standard, widely expected to be an Energy Performance Certifi cate rating E. Around 63% of UK stock has a rating lower than E. This will force rapid change over a relatively short timeframe.’ The EU will require all new buildings to be nearly zero energy by 2020.

Opportunities are rising for UK construction professionals in ‘smart cities’, according to a UK Trade & Industry report. Smart cities are those that achieve sustainability by integrating information and communications technology into their planning, design and management. The report analysed the ‘smart’

development of 10 high-growth markets – Hong Kong, Indonesia, Japan, Malaysia, the Philippines, Singapore, South Korea, Taiwan, Thailand and Vietnam – and highlighted a growing demand for green building technology and retrofi tting expertise. By 2020, it’s predicted there will be around 40 smart cities globally.

Europe // GREEN CONSISTENCY UK // ASIAN ATTRACTION

Opinion

THERE ARE SIGNS THE WEATHER IS STARTING TO TURN

It won’t surprise many of you to hear that the lack of credit in the financial system is holding back the economy. The shortage stems from the fallout of the

global financial crisis, whereby everyone (including governments) ran up too much debt, leading to the credit crunch. Now the banks are being encouraged to lend and support the economy at the same time as being told by regulators to deleverage. It may be hard to sympathise with them, but they are essentially stuck between a rock and a hard place. On the demand side of this equation are fi rms and households, who have been loath to take on more debt as the economic outlook remains in the balance. That’s the (near) history; what’s going on now?

Recent data from the Bank of England’s Credit Conditions Survey shows that, while some lenders now expect a small increase in overall credit availability in the coming three months, there are factors limiting the pick-up, such as tighter wholesale funding conditions. However, if this small increase does materialise, it follows nearly three years of declining credit availability.

The construction sector, particularly, has suffered from this dearth of fi nance. Data from the British Bankers’ Association shows that lending has fallen by around £8bn since January 2009. For construction, fi nance is crucial, as without it developments don’t get off the ground. Indeed, the latest RICS Construction Survey shows that workloads are continuing to fall – especially for public sector works – and expectations for the 12-month horizon are negative. Signifi cantly, surveyors cited the lack of available fi nance as the biggest hindrance to the sector.

Four years on from the crisis, credit is still constrained, building projects are unable to fi nd fi nance and there has been little material pick-up in construction activity. However, there are tentative signs that the weather is turning. The recent macroeconomic news fl ow has been slightly more positive, and there is clearly support forthcoming from policymakers. Firstly, the Bank of England has resumed its asset purchasing programme – commonly known as quantitative easing – in an attempt to inject more money into the system. There are also the recently announced initiatives of credit-easing, and the infrastructure investment vehicle for pension funds that was fi rst announced in the Autumn Statement. Both of these policies are designed to allow small businesses to grow, which will hopefully drive the domestic economy.

While these measures are a step in the right direction, they are no silver bullet. Quantitative easing has not had a major impact on the real economy, and it simply must before we can expect any real change in the lending landscape. And the credit-easing programme is very much in its infancy, so any boost to the economy remains to be seen. It’s clear the government can only do so much, as it has made restoring the public fi nances to health its raison d’être, but looking ahead we are cautiously optimistic.

Simon Rubinsohn RICS Chief Economist

DELAYED RESPONSESo far, initiatives such as quantitative easing from the Bank of England and its governor Mervyn King have failed to have any real impact

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01.11 // MODUS 09

:ONE BIG QUESTION HOW IS YOUR LOCAL COMMERCIAL PROPERTY MARKET PERFORMING?

04.12 // MODUS 09

Source: RICS Global Commercial Property Survey Q4 2011. Turn to page 24 for more on real estate investment in these fi ve cities.

Paris The offi ce leasing market was surprisingly active in 2011. The demand is from occupiers seeking better premises and cheaper deals, who are typically recentralising into core markets.

Melbourne The market is fairly soft, particularly on the demand side. Offi ce demand (which was market leading six months ago) has dissipated somewhat, and tenants in all sectors are more cautious.

New York Sales and leasing activities have been strong. At the same time, caution is the word of the day, as it is globally. The sense of uncertainty is palpable, with risk avoidance still ruling decision-making.

Bill Beauclerk MRICS, BG Carré

Andrew Nicol MRICS, Australian Unity

Alice DiMarzio FRICS, Newmark Knight Frank

London The offi ce market remains fi nely balanced, with low supply but also restrained demand. The development pipeline remains low with only well-funded developers able to commence projects.

Hong Kong Occupier demand in the corporate sector has weakened due to global events and the slowdown in China. Investors are cashed up and ready to buy, but are waiting for more advantageous pricing.

David Faulkner FRICS, Colliers International

Neil Prince MRICS, Matthews & Goodman

CanadaOLD AND NEW

Jameson House, Foster + Partners’ fi rst residential development in North America, has been completed in Vancouver. The construction of the 35-storey, mixed-use tower has been at the heart of a project to connect the city’s fi nancial centre with an emerging creative district, and involved restoring the adjacent Ceperley Rounsfell Building and Royal Financial Building, both built in the 1920s. Comprising 11 storeys of offi ces and shops and 23 storeys of apartments, the 33,000m2 tower was developed by Bosa Properties, and features a mechanised valet parking system, which has helped reduce the number of parking levels and the need for deeper excavation.

UKNEW NEW TOWN

Stevenage Borough Council has granted outline planning permission to redevelop the centre of the UK’s fi rst post-war new town. Designed by BDP on behalf of Stevenage Regeneration Limited, the £250m scheme hopes to revitalise the town centre by building new shops and restaurants, offi ces, a public transport interchange, a magistrates’ court, a hotel and 120 new homes, while also retaining the town square as a focal point.

IndiaPROPERTY DROPAfter a period of strong growth in occupier and investment demand, the market may be cooling, according to the latest RICS India Commercial Property Survey. It found that in Q4 2011, there was a drop in global rental expectations, with India now ranked at 24 (compared to 19 in Q3). ‘The continuing volatility in fi nancial markets, and rising infl ation and interest rates have led corporates and developers to be cautious,’ said Anshuman Magazine FRICS, Chair of RICS South Asia.

75%The percentage that Beijing

offi ce rents rose in 2011, overtaking Shanghai as the

most expensive location in mainland China


08 r ics.org10 r ics.org10 r ics.org

PLAY IT SAFEReal estate is seen as a safe asset in turbulent times, particularly in cities such as Paris

Insight

COMMERCIAL REAL ESTATE: THE VIEW FROM EUROPEDavid Bouch OBE FRICS EuroCapital Property Investors

Two years ago, in the aftermath of the Lehman crash, real estate markets across Europe reached a state of near stagnation. While they are now back closer

to normal levels, the occupational markets still lack any real strength as organisations try to keep overheads to a minimum. Despite the weakness in take-up this has caused across Europe and elsewhere, recent surveys show that real estate is widely regarded as an attractive asset class in unpredictable times. The majority of European investors look to real estate to offer them security, and prefer to ‘play safe’ in proven long-term locations such as London and Paris, or in the principal German cities where growth is now starting to occur again. Those in search of higher returns are looking either to secondary properties in established locations, or to newly emerging markets with good growth prospects, such as Poland.

As markets picked up and new capital started to fl ow into the sector, many existing real estate funds found their ability to move forward hampered by legacy issues, with loan to value and other covenants having taken them into default territory. Falling values and banking issues mean many are unwilling to sell properties and take losses, opting instead to extend the fund life. There has also been an adverse effect on perceptions of multi-country funds, many of which embraced southern Europe. Across the board, those with allocations to Italy, Spain, Portugal and Greece have been pulled down into negative growth.

For newly raised funds there is still, on balance, an aversion to risk and a strong preference for core and core-plus properties offering security of income from long leases, or for major cities based on important national or regional economies. The mood of caution has also been refl ected in a narrowing of geographical considerations, with a return to traditional western European countries and a resistance to the previously popular ‘Club Med’ countries, notably Spain, Portugal and Italy. Investors looking for locations with good growth prospects have been drawn to the established countries of central Europe – particularly Poland, with its growing GDP – but there is little appetite for the emerging economies with less established credentials.

Preferences have also changed among the asset classes. Retail became popular as economic recovery started to get under way, replacing offi ces as the preferred asset class for many funds. The hiatus in the economic recovery caused by the eurozone crisis has tempered this, but retail remains popular. Business-related real estate, such as hotels, and those likely to benefi t from changing demographic factors, such as nursing and retirement homes, are also the focus of attention from an increasing number of groups.

The search for higher returns has brought higher-risk opportunity funds back into focus. Usually offering target returns of 20% over fi ve years, they expect to buy at low

prices that allow them to compete vigorously on rental and investment pricing while still enabling them to achieve the higher levels of internal rates of return. Many believe there will be rich opportunities arising from distressed asset sales; however, while some sales are starting to occur, the current situation in Europe is only producing a slow trickle that has not yet shown any sign of becoming a fl ood.

Leverage plays a big part in obtaining the higher returns sought by opportunity funds. With no sign of how the eurozone crisis will play out, this is proving diffi cult due to the lack of credit availability. Higher added-value situations invariably involve property that does not conform to the banks’ increasingly strict perception of what constitutes the ideal security. A number of the major lenders of the past have ceased their international expansion programmes and sought to concentrate on a smaller number of key markets, usually close to their home base. If there is no alternative source of fi nancing, this will hold back the recovery of the broader, more entrepreneurial market activity.

An examination of European markets over a 30-year period shows that, while the total level of investment has seen substantial fl uctuation, the fl ows of equity capital into real estate have remained remarkably stable. The difference – seen at times of greatest overall activity – has been almost entirely due to periods when debt was readily available. With Europe facing one of the severest credit shortages in modern history, this is bound to have a major infl uence on the evolution of the sector in the foreseeable future. Over recent decades, many somewhat imprudent investment decisions have been rescued by the near inevitability of the supply/demand market cycle coming to their rescue. Typically, cycles have lasted three to fi ve years. With no early resolution to the bank credit shortage in prospect, it seems the current down cycle is destined to last much longer – and some fundamental changes in the ways markets operate will need to evolve in order to deal with this.

DAVID BOUCH OBE FRICS is managing director of EuroCapital Property Investors. eurocapitalproperty.eu.


01.11 // MODUS 09

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This practical guide demystifi es complex subject matter and off ers expert advice on visual identifi cation, assessment and the basic testing of domestic services.19095 // £49.95

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RICS Valuation – Professional Standards (the Red Book) has been fully revised to incorporate the new International Valuation Standards.19035 // £120 (£200 non RICS members)

An accessible insider’s guide to help readers who have never been involved with building before to successfully build their own homes.18690 // £25

This comprehensive guide is packed with property tax-saving advice presented in an easy-to-read style.19151 // £24.95

04.12 // MODUS 11

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NigeriaGLAZED LOOK

A new commercial and residential scheme has been proposed for a banana-shaped artifi cial island in Lagos harbour. Designed by Studio Seilern Architects for Templars, the US$19m (£12m) Banana Island waterfront development would include offi ce space, apartments and communal leisure facilities. The design includes using semi-permeable patterns and planted trellising on the façade to provide shade to the fully glazed offi ces.

Abu DhabiWATER WORLD

The Abu Dhabi Urban Planning Council has approved a masterplan for a 6.8m m2 waterfront community to be buil t on Yas Island. Already home to an F1 motor-racing circuit and the Ferrari World theme park, the development is one of the most prominent projects in the emirates. Led by Broadway Malyan for Aldar PJSC, the plan will include housing for 55,000 people, with a road, cycle and light rapid transport network.

UKSPACE SAVINGThe government has announced £100m of savings in 2011-2012 from rationalising its property estate. According to Cabinet Offi ce fi gures, central government occupies 16.5bn m2 over almost 14,000 properties. While the cost of property per employee (£4,454) is similar to the private sector (£4,525), fi gures show that public sector employees have 16% more space. To reduce this, departments will be forced to share space, and redundant buildings will be sold or sublet.

£1.4bnThe prime London new-build

residential market is being driven almost exclusively by international

buyers, generating a net £1.4bn infl ow of equity in 2011 (Savills)

1m ft2The amount of space (92,900m2)

Emaar Properties will add to The Dubai Mall this year – already the world’s largest mall

TOP FIVE Most expensive US homes sold in 20111. Los Altos Hills mansion, California US$100m2. 15 Central Park West, New York US$88m3. Spelling Manor, California US$85m4. Pine Brook Atherton, California US$53m5. The Plaza, New York US$48mSource: Bloomberg Businessweek


08 r ics.org

NEWS BITES

Open planNew rules in Scotland now make it easier for people to make changes to their homes – including extensions, decking and access ramps – without applying for planning permission. Certain restrictions still apply for conservation areas and listed buildings. View the regulations at bit.ly/xjGoai.

Skills driveLaing O’Rourke is leading a drive to create 500 new apprenticeships in North West England. A Construction Group Training Association, chaired by the firm’s head of UK Construction, Callum Tuckett MRICS, will partner local authorities to boost apprenticeships in the region.

Growing ElmsWandsworth Council has approved plans for the first large housing scheme in London’s Nine Elms regeneration zone. The Marco Polo House development will include 456 homes, of which 68 apartments will be for local first-time buyers in a shared ownership scheme, plus 1,200m2 of commercial space.

Staying putIndustrial demand in Australia softened in early 2012, leading to more stable rental conditions and a slowdown in new industrial projects, according to Jones Lang LaSalle. ‘Smaller businesses are preferring to “stay put” or to lease existing space when available,’ said head of Australian industrial Michael Fenton.

12 r ics.org

Insight

CONSISTENCY IN EVALUATING VIABILITY IS KEY TO GROWTHRobert Fourt MRICS Gerald Eve

It is becoming increasingly rare these days when talking about planning applications for major development schemes not to

include the words ‘…accompanied by a financial viability assessment’. Financial viability, while only one of the material considerations in granting or refusing a planning application, has become a central feature in many determinations. Also, in establishing such matters as planning policy and Community Infrastructure Levy charging rates, viability is an important part of the process, and a key tenet of the National Planning Policy Framework.

The odd thing about financial viability in planning in the past was the lack of any comprehensive guidance. The effect of inadequate viability assessments, or poorly undertaken reviews for local authorities, can result in schemes being refused or deemed unviable. At area-wide level, the consequences can be high expectations of what developments can afford.

It is perhaps timely, then, that RICS has stepped forward to provide much-needed

guidance in this area, dispelling myths and providing an objective and transparent framework for practitioners and users. While the guidance accepts that the fundamental purpose of good planning extends well beyond viability, the capability to deliver essential development and associated infrastructure is inextricably linked to the delivery of land and viable development.

Given the current economic climate, the private sector will be relied upon to deliver both development and consequential planning obligations. It is, therefore, key for all those involved in the planning process to have a shared understanding of development viability and, in turn, achieve the consistency in approach and assessment that is so important for encouraging investment.

Clearly development is key to stimulating growth in the economy but, for it to do so, it must be viable.

An exposure draft of the Financial viability in planning guidance note will be published at the end of April 2012 at rics.org/standards.

USPRISON WORKSAtkins has been appointed to undertake structural repair work to the world-famous prison on Alcatraz Island in San Francisco Bay. The firm will provide construction management services to strengthen beams and floors in the penitentiary building on the island, also known as ‘the Rock’, as part of the Alcatraz Historic Structures Stabilization Project. ‘We look forward to addressing the unique challenges of this project, such as working on an island that is only accessible by boat, with no landlines for telephone or data services,’ said Gary Self, senior group manager at Atkins.

20%BIM trials at EC Harris showed costs reduced

by 20%, programme by 10% and reduced risk allowances (RICS BIM

conference)

DenmarkFINANCIAL FANCY

International accounting firm KPMG has moved into new headquarters in Frederiksberg. Designed by 3XN, the building has 32,500m2 of office space and 1,300m2 of retail space, and has been designed in the shape of a clover, dividing the space into smaller sections. A series of metallic-green installations have been fitted throughout the building, which double as private meeting areas. The design team has helped to reduce the building’s energy consumption by controlling the inflow of light and regulating solar heat gain with an automatic solar-screening façade.


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04.12 // MODUS 13


he UK’s wide-eyed belief in property as a path to riches and security has been severely

shaken since the market peak in 2007. House prices in vast swaths of Northern Ireland and Wales continue to plummet, while areas such as London and the South East have seen partial recoveries. But figures from the Halifax show that just two local authority districts have higher house prices now than in 2007 – Essex and South Lakeland in Cumbria – with the vast majority still down on the peak.

UK mortgage lending topped £140bn in 2011, but borrowing levels are still just over a third of the £360bn lent during the boom. Owner-occupation levels have dropped for the sixth consecutive year, to 66% from a high of 70.9% in 2003, to hit their lowest since 1988. And at the end of 2011, the average house price was £164,785, down from a peak of £212,319 in 2007. It was a mixed picture overall, with tight credit thawing noticeably and transaction levels rising slightly. ‘An improvement in credit availability saw a larger number of active mortgage lenders, greater competition for lower LTV [loan to value] business and a modestly growing risk appetite,’ summed

up the Council of Mortgage Lenders’ (CML) chief economist Bob Pannell.

But the debris of the credit crunch and market crash is still part of the mortgage landscape. Roughly 800,000 property owners who bought between 2006 and 2008 are ‘mortgage prisoners’, unable to capitalise their homes without a loss. Mortgage arrears and repossession levels have held steady due to low interest rates and lender forbearance, with thousands more struggling to repay mortgages they could arguably never afford.

Between 2000 and 2007, confidence was high. The few commentators who warned that a bust was on the way were drowned out by the market frenzy fuelled by property programmes, the media and the chattering classes. Easy credit, consumer and lender greed, and mortgage provider desperation for market share to satisfy shareholders rested on the lazy assumption that house prices would rise forever. Borrowers in their thousands used soaring prices as the excuse they needed to dip into their homes like piggy banks, remortgaging every few years to release equity to ‘wipe’ debts.

Following the crash, the Financial Services Authority (FSA) investigated and identified four key lending abuses that had both driven and distorted the market, and in many cases caused spikes in arrears. Sub-prime mortgages topped the list, where people with poor credit histories and often outstanding debts were offered loans at loaded mortgage rates coupled with eye-watering fees. The regulator also found high levels of interest-only borrowing with no demonstrable way of paying back the capital sum, with many using the vehicle to lower repayments and stretch what they could borrow.

Self-certification loans, subsequently dubbed ‘liar loans’, were intended for the self-employed or those with several income streams, allowing them to declare affordability without documentary evidence. Finally, fast-track allowed lenders to process applications usually at lower LTVs quickly, again with the minimum of checks. As a result, this well-meaning product was exploited by mortgage advisers to whisk borrowers through the underwriting process, often hiding a multitude of sins. The FSA’s investigation unsurprisingly revealed far higher arrears levels among these cases, especially when single cases revealed a combination of these toxic factors. ‘Mortgage lending decisions must no longer rely on house prices rising,’ said the FSA when it published its long-awaited Mortgage Market Review (MMR) on 19 December.

The long-anticipated 733-page CP11/31 draft consultation paper was broadly welcomed by the mortgage industry. The final rules had been delayed by lengthy negotiations and the FSA’s determination to silence its critics, but aimed to reverse the regulatory and industry wrongs of the mortgage boom. Barring the newer proposals on niche lending and interest-only, the industry is ready and willing to work with this sensible, exhaustive and clearly laid-out set of proposals, with its emphasis on affordability and income checks. The draft rules now propose what ‘any good underwriter should already be doing’, as director of the Association of Mortgage Intermediaries, Robert Sinclair, pointed out.

The biggest headlines immediately after the paper was published focused on the ban on non-advised sales, which means that bank branch advisers will have to be qualified to offer advice, or that banks will need to lean more heavily on brokers to sell mortgages. More generally, says Stephen Smith, director of housing at Legal & General, the lender’s responsibility for affordability assessment proposals will >>

THE MONEY

MACHINETHE LENDING

LANDSCAPE HAS UNDERGONE A

SEISMIC SHIFT – SO WHAT’S NEXT, ASKS VICTORIA HARTLEY

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on the housing market. Spicerhaart’s Alison Beech called the schemes ‘twiddling at the edges’, while Alison Williams, head of professional services at Nottingham Building Society, says they are valuable but that first-time buyers still have to be able to amass a deposit. ‘Even then, when you own 25-50% of the property, is the borrower going to be able to afford to staircase or move on at a later date?’ However, she concedes that for some it still has to be better to buy than rent, which in some parts of the UK is extremely expensive.

Robert Gardner, Nationwide’s chief economist, says schemes such as FirstBuy and NewBuy are worthwhile, but affordability and the wider economic backdrop remain obstacles. ‘We need the labour market to improve before you’ll see any big improvement in the first-time buyer market,’ he says. ‘Wages are not rising fast enough to encourage people to buy property and we need to build more to help people afford homes. High prices are the signal telling us we need to build more property.’

UK lenders have worked hard in the past 12 months to bridge the affordability gap for buyers. Aldermore launched the first widely available 100% mortgage since the credit crunch in September, and Taylor Wimpey with Melton Mowbray and >>

mean far more scrutiny of the mortgage sales process. This could mean a lengthier, more drawn-out process, slowing down transactions as lenders demand more paperwork to comply with the regulator. ‘Currently, over half of all sales are non-advised,’ he says. ‘Arguably, lenders are already stretching bank branches and staff as far as they can go, so any extra lending volumes could well be forced through brokers.’ Another key responsible lending issue is that all applications will have to be stress-tested against future bank base rate increases. The FSA doesn’t say how, however, which could lead to more market confusion on how lenders accept or decline applications.

Meanwhile, the UK mortgage market is also facing regulation from further afield. The EC mortgage directive, currently being worked through in Brussels by two committees – ECON (European Community Organizing Network) and IMCO (Internal Market and Consumer Protection) – is making slow progress. The battle to keep buy-to-let out of the EU proposals to regulate all UK lending has been one of the biggest challenges for industry lobbyists. However, reports suggest that negotiations are going well for the UK, and the final draft of the directive is expected any day now.

The third regulatory strand is a consultation paper from the Financial Stability Board, which focuses solely on underwriting principles. The rules are expected soon, but lobbyists report little extra work for practitioners. To the industry’s relief, this last set of rules dovetails neatly with key proposals already enshrined in the MMR, so is not expected to unsettle the market further.

The compliance costs of regulation will undoubtedly fall more heavily on the UK’s lenders, but providers have already absorbed the majority of the changes. The bailed-out banks, the largest UK lender, Lloyds, and the fourth biggest, the Royal Bank of Scotland, have consistently lent marginally less year-on-year since the credit crunch. The UK’s number two, Santander, has done the same. However, other lenders, including Barclays (the third largest), Nationwide (fifth) and HSBC (sixth) have absorbed the regulator’s message in the MMR but continue to hunt for market share, alongside the bigger

building societies. The MMR will cost lenders dear, but its longer-term effects will be a hardwired-in, more conservative approach to lending that is likely to become the norm.

After a slow housing policy start from government minister Grant Shapps, he announced plans to simplify the red tape surrounding new-build homes in January 2011. FirstBuyDirect was next out, announced in the March 2011 Budget, which targets 10,500 first-time buyers with the offer of a 20% equity loan, with the funding split between housing associations and building firms. The Stamp Duty holiday for first-time buyers on properties worth up to £250,000 was also introduced, and has just ended. Later in the year, the government presented its housing strategy, a sprawling piecemeal plan including NewBuy, a mortgage indemnity scheme in partnership with the CML and the Home Builders Federation, which aims to help 100,000 first-time buyers. The Department for Communities and Local Government hasn’t confirmed any mortgage product details for the scheme, despite a scheduled March launch date, although Barclays, Nationwide and Lloyds all have products in development.

The government has also promised to extend the Right to Buy scheme, a policy hit by heavy criticism by property firm Hometrack, which insists the government got its sums wrong over its promise to replace every home sold by building another. Other measures include £1.8bn for affordable homes, the promise to tackle the problem of 700,000 empty properties, and a consultation on making council tenants on incomes of £100,000 and over pay market rent.

Commentators welcome all efforts to help first-time buyers, but fear the government schemes will do little to spur

Mortgage finance//

WAGES ARE NOT RISING FAST ENOUGH. WE NEED TO BUILD MORE

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Saffron building societies became the fi rst builder-mutual partnership to launch a 95% LTV deal for first-time buyers in February 2011, spearheading the trend for such partnerships. Other lenders have offered guarantor schemes, savings accounts linked to the promise to consider an application, such as Nationwide’s Save to Buy product. The same lender also launched a fi rst-time buyer campaign to make buyers aware that high LTV products have returned to the market.

However, for fi rst-time buyers, Pannell says the market must look ‘ludicrously conservative’ in its approach, giving established homeowners preferential product pricing and availability. The price of the credit crunch has been the loss of diversity in mortgage lending. At worst, big names such as GMAC-RFC and Kensington have been named and shamed for treating adverse credit borrowers in arrears shoddily. At best, UK lenders have improved risk processes, including affordability and underwriting checks, instead of chasing volumes at any cost. However, the high price for the new lending era is longer processing times, more applicant rejections and a more frustrating customer experience.

Pannell believes it’s too straightforward to say that more relaxed lending criteria equates to rising house prices. ‘Clearly criteria changes like restrictions to interest-only lending, which the UK’s biggest mortgage lenders Lloyds and Santander just made in February, will have a major impact on affordability, just as regulation like Basel III or the MMR will make some categories of lending more costly for the end consumer,’ he says. But he adds that it’s the big demographic issues that drive house prices on and upwards.

On an island with limited space such as the UK, prices will always ultimately keep on rising, says Richard Sexton, director of business development at chartered surveyors e-surv. ‘There will always be regional differences, but like Hong Kong,

which boasts some of the most expensive properties on the planet, whenever there is limited resource there will always be huge demand driving prices upwards.’

So where is the market heading, and what will it look like in fi ve to 10 years’ time? As is already being seen in central London, a higher proportion of the market will be cash fi nanced, as property owners consolidate cash-rich positions. The more conservative lending approach is likely to remain, although competition and transaction numbers will increase over time as more homeowners start to remortgage again. Sexton says he expects house price growth to be back up to 5-7% by 2014, barring any further substantial market shocks.

This is also likely to mean children living with parents longer, which is already happening if you look at the statistics, says Georgiana Hibberd MRICS, Associate Director of the Residential Professional Group at RICS. ‘People’s way of living may have to change. Traditions like living as a single family unit with 2.4 children will be replaced by three generations living together in one house.’ But, she adds, ‘I’m not confident these changes are being picked up and documented in the way they need to be.’

As the cult of home ownership begins to fade, says David Dalby FRICS, Director of the RICS Built Environment & Property Professional Group, people will become more fl exible in their living arrangements. ‘In terms of housebuilding, the current

obsession with a home as an investment must fade. One of the challenges is for society to perceive other types of tenure as just as valid. For example, more building to rent needs to be established so those at both the beginning and end of their lives fi nd renting more acceptable and useful.’ The challenge is to build tenure-neutral buildings mixing tenants, owner-occupiers and housing association tenants seamlessly together, he adds.

Whatever the future brings, including the spectre of another housing boom, a repeat of the bad old days looks increasingly unlikely. Says Pannell, ‘Where the housing market used to be the engine driving the economy forward, it’ll just become a much duller section of the economy.’

VICTORIA HARTLEY is a fi nancial journalist and editor of Mortgage Solutions.

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IN TERMS OF HOUSEBUILDING, THE CURRENT OBSESSION WITH A HOME

AS AN INVESTMENT MUST FADE

UK HOUSE PRICESAt the end of the upswing, real prices were 2.2 times higher than a decade earlier // By November 2011, real prices were down 5.7% on an annualised basis // The average earnings to house price ratio had dropped from its spring 2007 peak of 5.8 to 4.4 by November 2011*

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AGREE? DISAGREE?

Share your views by emailing

[email protected] or tweeting

@modusmag.


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The general expectations for the housing and mortgage market for 2012 are that it will look a lot like 2011, and possibly a little worse. The reality is that it is

very hard to be certain because ‘events’ keep unexpectedly occurring that alter the trajectory of the market upwards or downwards. The big concerns have been the likely downward course of house prices and transactions, an adequate supply of mortgage finance, and the threat of rising interest rates and falling employment.

Most recently we have seen mortgage lending take an upward course, with lending in January estimated at £10.5bn, a billion up on the same period last year, along with a clear downward trend in arrears and repossessions – total repossessions for 2011 were 36,200, compared to 37,100 in 2010. There is some debate between HMRC and the Council for Mortgage Lenders as to whether the increase in lending is partly a product of purchases being brought forward in the run-up to the end of the Stamp Duty holiday in March. HMRC research suggested the holiday had done little to improve affordability, but this rather misses the point about how the reduction motivates buyers to bring action forward, which has been well evidenced previously.

In terms of increased mortgage lending, with more quantitative easing under way and no

planned increase in interest rates, it is clear that savings inflows will come under pressure. The outturn for gross lending in 2011 was £140bn higher than expected, but it is hard to see that being exceeded in 2012, given the continued weakness of the securitisation market and the steady downward pressure exercised by higher regulatory capital requirements and balance sheet restructuring, along with the tighter regime likely to emerge from the FSA’s Mortgage Market Review. Put together, these suggest a tighter and more expensive mortgage market with more limited access for some borrowers.

There is also little to suggest that the economy has turned the corner yet, with unemployment still rising and incomes falling. There may be some good news to emerge from the eurozone, though it may take time for this to be really consolidated and the UK is exposed because it is such a significant market for exports.

If the market trends are somewhat volatile, how then might government fit into this picture? The soon-to-be-launched NewBuy scheme is stated to be going to help 100, 000 buyers of new homes, though it is far from clear whether this will be achieved. Much turns on the scale of sign-up by lenders and builders, and the operational features of the scheme – there is real potential for it to be over-complicated. The

alternative local authority initiative built out of the Lloyds ‘Lend a Hand’ scheme seems to have far more potential, though again we have to see what traction it can generate. As it stands, and although the government’s housing strategy had more than 100 measures in it, much turns on market confidence and the willingness of individuals and companies to invest in the UK market. Whatever the story, the overall funding emanating from government is reducing, and this despite severe housing supply shortages.

The housing market requires more funding, and debt finance from lenders is only part of that. With the continued fall in the level of home ownership and the rise in private renting, institutional investors are now seen as important players. But they are naturally cautious, and the current environment might still not be positive enough to bring them in. The new review of the private rented sector being undertaken by Sir Adrian Montague must move us on from the Treasury review of 2011 and bring forward some practical lessons about how to unlock this market. If it does, when we look back at 2012 next year we might view it as far more positive.

DR PETER WILLIAMS is director of the University of Cambridge Centre for Housing and Planning Research. cchpr.landecon.cam.ac.uk

04.12 // MODUS 19

Housing market focus

WHAT DOES 2012 HOLD?


20 rics.org

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Finding the home of your dreams is rarely easy, but not many of us are brave enough to go as far as Tim Deeks MRICS. When he was struggling to find a house that was right for his growing family in Billericay, Essex, he jumped at the chance to demolish an old, unstable bungalow and start again. ‘I’ve always wanted to build my own home,’ he expains. ‘We started looking for

something where we could extend or add another level. Then we came across this place, and the figures added up to knock it down.’ That was in June 2007. Work started on site in February 2009, and the family moved into their new five-bedroom home in November 2009.

As a chartered building surveyor, Deeks found his professional knowledge invaluable throughout the process. He has now added self-build consultancy to his firm’s services, and hopes to repeat his success for clients in the Essex area. ‘There’s quite a bit a chartered surveyor can help with,’ he says. ‘Most people want to know how big they can build and how much it’s going to cost them. There are all the hidden costs as well, like party wall issues, or if you don’t register for VAT that can hit you, too.’

In the UK, self-build has always been the preserve of a courageous minority, accounting for around 10% of new homes. Now the government wants to make it a genuine option for many more people, following the example of countries such as Sweden and Germany, where self-builders are responsible for more than 60% of all new homes. Given that self-builders’ two biggest concerns are land and money, chartered surveyors are well placed to offer them advice.

‘There are lots of self-build horror stories – it’s a dream that can turn

into a nightmare,’ says David Dalby FRICS, Director of the RICS Built Environment & Property Professional Group. ‘Even when you’re working on a straightforward scheme, it does rely on a fairly high level of project management. Surveyors need to be able to offer a one-stop shop for all self-builders’ needs. They could help with planning and design, getting the necessary approvals, appointing contractors, or just organising the project from beginning to end to take all the hassle away.’

Housing minister Grant Shapps is an enthusiastic convert to the self-building cause, pledging in February last year to ‘kick-start a housebuilding revolution’ and establishing a working group to consider land availability, finance, regulation and help for self-builders. Its action plan was published in July 2011, while in November, the government’s housing strategy set a headline target of doubling the number of ‘custom homes’ built over the next decade, establishing a £30m fund to provide small loans to get projects off the ground. >>

THE UK GOVERNMENT IS AIMING TO DOUBLE THE NUMBER OF CUSTOM HOMES OVER THE NEXT 10 YEARS. HOW CAN SURVEYORS TAKE ADVANTAGE OF THIS GROWING TREND, ASKS KATIE PUCKETT

Chartered building surveyor Tim Deeks’ Essex home (left). He now offers self-build services to clients

Photography by Thomas Ball


councils decided they wanted to look at a different way of procuring development for the site, and I become involved two years ago to let them know what the options were,’ he explains. He is now helping them select a development partner to deliver the homes, and doesn’t see any reason why councils elsewhere shouldn’t follow the same route. He finds his role is often to help maintain momentum and create confidence in the process. ‘It’s unfamiliar, and so some will think it is more risky. In fact, there’s nothing particularly hard about it compared to a “normal” project. But it does need different skills from planners, building societies and housing providers.’

The government has also said it intends to maximise opportunities for custom builders through public sector land release programmes. ‘On a site of 200 homes, government agencies or local authorities could specify a need for a proportion of custom or self-build,’ says Stephen Teagle MRICS, managing director of affordable housing and regeneration at Galliford Try and a fellow member of the working group. ‘It also presents an opportunity for developers to meet their section 106 obligations. I don’t think it will become common, but it could be one of those situations that arises from specific circumstances.’

Outside his day job, Teagle has advised a local self-build group near where he lives in Cornwall, hoping to provide around 15 homes, and has been struck by the diversity of the market. He believes self-build is ripe for rebranding. ‘The view that it’s just for the checked shirt, rainbow sweater brigade is old hat,’ he says. ‘People are driven by economic necessity. You do have groups being formed

on a cooperative basis to procure and deliver self-build housing; but at the other of the market there are people who are interested in buying a fairly standard product and customising it.’

One of surveyors’ most important roles will be in addressing the other major stumbling block to self-build schemes, finance, which remains dauntingly scarce. According to BuildStore, the number and size of lenders in this market dropped drastically when recession hit, from around 35 in 2007 to fewer than a dozen by the time the working group was set up. The few lenders that will take a chance on self-build projects are seeking much lower loan-to-value ratios, down from 95% to a maximum of 85%, which means self-builders require much more cash up-front. The finance sub-group discovered many self-builders were hindered by the move to automated decision-making by building societies, and because they were perceived as higher risk. ‘That

As it stands, the self-build market is estimated to be worth £3.6bn a year. In 2010-11, 13,800 people completed their own projects, down on the boom years of 2005-2007, when the annual total reached 16,000-18,000 homes. In the popular imagination, self-builders are the single-minded pioneers shown on TV programmes such as Grand Designs, sinking their life savings into fulfilling a quixotic architectural vision. In reality, self-builders encompass every price band and a whole range of motivations, from people building their dream home on the perfect plot to those simply looking for an affordable way to get on the housing ladder with a standardised off-the-shelf kit. Projects may be much larger than one home, where community groups come together to develop a piece of land, perhaps with the support of a housing association. ‘Self-build’ is also something of a misnomer – while many try to carry out as much of the administration and building work as they can, almost all require the services of a professional at some point.

Deeks says his experience came in useful for everything from ensuring the buildability of his design and producing life-cycle costs to assessing construction methods and negotiating tenders, not to mention on Building Control approval, boundary disputes, warranties and VAT submissions. Knowing how to navigate the planning system enabled him to secure permission for a very modern design, while an understanding of project finance and risk helped him resolve the payment schedule for his chosen timber frame company. ‘Many ask for a large percentage upfront and then do not deliver on time or go broke,’ he says. ‘I negotiated money to be held in an escrow account with solicitors and released when the frame was delivered.’

For his self-build consultancy business to take off, though, the government will need to remove several significant barriers. ‘The problem is, it’s quite a niche market,’ he says. ‘You need someone who’s got a plot, which is hard to find in Essex. People can’t borrow either, so the financing is a bit of a pitfall.’ In fact, land is hard to find everywhere. Mainstream housebuilders are quick to snap up available sites, and local authorities are reluctant to set aside plots to self-builders. According to BuildStore, which offers products and services to self-builders, there are around 80,000 people registered on its PlotSearch database, but only 8,535 available sites.

But the mainstream future of self-build may lie not in single homes. ‘If self-build is going to play a part in solving the UK’s housing shortage, it’s not going to be the projects that Grand Designs showcases – it’s going to be sites that can house 10 or 20 families, and it’s going to have to fit within local plans,’ says Jeremy Blackburn, RICS UK Head of Policy.

Stephen Hill MRICS, director of C20 Futureplanners, is a long-time advocate of self-building and chaired the sub-group focusing on land. He is currently working on a co-housing project in Cambridge, which would see 35-40 homes built on council-owned land after a deal to sell the site to a housebuilder fell through. ‘The

22 rics.org

Self-build//

‘It’s unfamiliar, so some will think it’s more risky. In fact, there’s nothing hard about it compared to a “normal” project’


04.12 // MODUS 23

won’t necessarily come across them on a regular basis. I do, so I know how useful they can be, but Joe Bloggs in the street doesn’t.’

Perhaps surveyors’ greatest selling point is that they are not any of those professions, but an independent consultant. As Deeks points out: ‘People are very suspicious of builders. They need someone with a bit of experience to help them. As soon as you ask a builder to change anything, that adds to the cost – we as a profession could have stopped the problems occurring.’

ignores the fact that once self-build properties are finished, they are much lower risk,’ says Hill. ‘Typically the loan to value is very good, and to get that far, they must be very committed and are probably in it for the long term.’

Nevertheless, Dalby believes that lenders’ nervousness about self-build projects is well founded, and suggests that the presence of a surveyor could reduce the risk of spiralling costs and bring comfort to both sides. ‘When I was doing valuation work for lenders, you knew that self-builders would be coming back for additional funding before they finished,’ he says. ‘Self-build projects almost inevitably went over budget and over time. People need to get proper advice about their proposal before they start, and to get the right funding at the right cost.’

While the valuation of completed projects is fairly straightforward, during construction it’s a different ball game. Self-build mortgages allow people to draw down project finance at different stages of the build, but Dalby points out that there may be a discrepancy between the amount of money lent mid-project and its true value. ‘You have to look at what the half-finished building would get if it went on the market today – it’s quite a complicated area. In the last two recessions, lenders have made significant losses on self-build schemes.’ RICS is now speaking to building societies and the Council of Mortgage Lenders to develop guidance for members.

There is one further barrier to surveyors hoping to take advantage of this new market – the low public profile of surveying as a service. The roles of architects and builders are well understood and the need for their services evident to all but the most hands-on self-builders, and these professions often provide project management, too. ‘I don’t think people think of surveyors,’ says John Gillespie, national development director of the Community Self Build Agency, which supports group schemes. ‘If you’re using a contractor, they will have a pretty good idea of how much to purchase in terms of materials. If you buy a kit home, that takes a whole element of surveying out of the project, too. It’s one of those professions that unless you know where they are and what they’re exactly for, you

POTTON HOMESProving that prefab doesn’t have to mean up-to-the-minute modernism, Potton offers a range of traditional English designs under collections such as ‘Heritage’, ‘Rectory’, ‘Renaissance’ and ‘Shire’. The firm delivers and erects the timber frame structure, and also offers project management and full build services. potton.co.uk

RAPYDA novel approach to building one- or two-storey extensions, Rapyd Rooms are standard boxes that can be customised with cladding, decking, solar canopy and roof garden options. Manufacturer Buildings for the Future claims that the costs are 30% less than traditional extensions and that the rooms are installed in a fifth of the time. rapyd.co.uk

ECOSPACEEcospace’s ‘Configurator’ enables buyers to play around with the shape, size, fixtures and fittings of a modular garden studio. Buildings arrive highly insulated, fitted with low-energy heating and lighting systems, and fully decorated.

ecospacestudios.com

CLOUD NINE These flatpack homes come equipped with renewable and low-carbon technologies to meet level 4 of the Code for Sustainable Homes as standard, and can be upgraded to meet the higher levels, too. Air-tightness and U-values are on a par with PassivHaus, which means the cost of heating the structures is extremely low – the annual cost of heating the showhouse was just £327 in 2010. cloudnine-living.com

‘The view that it’s just for the checked shirt, rainbow sweater brigade is old hat. People are driven by economic necessity’

HUF HAUSThis German manufacturer will be familiar to viewers of Grand Designs, championed by Kevin McCloud for the quality of its engineering and sustainability credentials. These minimalist, open-plan, timber-frame homes are neither cheap nor off-the-shelf as such – rather, clients work with Huf’s in-house architects to create a bespoke design and every element of the interior finishes. huf-haus.com

OF THE BEST PREFABS 5


Tokyo

*excluding development sites (Cushman & Wakefield)**Q3 2011 (compared to previous 12 months)Sources: Winning in Growth Cities 2011/12 (Cushman & Wakefield); A new world of cities (Jones Lang LaSalle); Global Capital Flows (Jones Lang LaSalle); Global Investor Sentiment (Colliers International); Emerging Trends in Real Estate 2012 (Urban Land Institute); joneslanglasalle.com.hk; knightfrank.com.hk; knightfrank.fr; bis.com.au

GDP (2008)

US$1,406bn (£889bn)

Typical yields (US 2011)

Offices 5%

Retail 5.5%

Industrial 7.15%

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2009-2011*

US$44.9bn (£28.6bn)

Investment volume growth**

165.5%

Total office stock (2011)

46.5m m2

GDP (2008)US$565bn (£360bn)

Typical yields (UK 2011)

Offices 4% Retail 3% Industrial 6%Real estate investment 2009-11*

US$63.8bn (£40.6bn)


2.4%Total office stock (2011)

23.8m m2

ONE WORLD TRADE CENTERAlready an icon in terms of history and design, the new tower will feature 240,000m2 of office space and 5,000m2 of retail space. Though build costs have risen to an estimated US$3.8bn (£2.4bn), no expense is being spared, particularly on safety and evacuation systems such as extra-wide pressurised stairs and enhanced elevators. Cushman & Wakefield is acting as exclusive leasing agent.

The increase in property

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FIVE OF THE BEST CITIES FOR GLOBAL COMMERCIAL PROPERTY INVESTMENT

TOP TIER

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Illustration by Ian Dutnall

TOP 20 CITIES FOR GLOBAL PROPERTY INVESTMENT (12 months to Q3 2011)

50%The amount of global commercial real estate investment concentrated in 30 high-order cities.

MODUS_April_P24-25_investment_v4.indd 24 19/03/2012 14:54

Investment//

GDP (2008)

US$564bn (£359bn)

Typical yields

(France 2011)

Offices 4.5%

Retail 4.5%

Industrial 7%

Real estate investment

2009-11*

US$35.1bn (£22bn)

Investment volume

growth**

41.1%


26.1m m2

GDP (2008)US$320bn (£204bn)

Typical yields (Hong Kong

2011)Offices 2.5%Retail 3% Industrial 5.2%Real estate investment

2009-11*US$34.8bn (£22.2bn)

Investment volume

growth**34.3%Total office stock (2011)

4.2m m2

GDP (2008)

US$172bn (£109bn)

Typical yields (Australia 2011)

Offices 6.25%

Retail 5%

Industrial 8%

Real estate investment 2009-11*

US$9.1bn (£5.8bn)


120.4%


4.1m m2

The total year-to-date

investment (£5bn) in

office real estate in the

Greater Paris region (Q3

2011). This represented

an increase of €1.4bn, or

32%, over the first nine

months of 2010. Paris

is seen as offering a

diverse tenant base and

a large mature market,

and is second to London

for attracting foreign

investment.

ORIGAMI BUILDINGBarclays Capital has set up its HQ in the 12-floor Origami building – so-called because of its ‘folded paper’ design by Manuelle Gautrand. The rebuilt 4,900m2 scheme was leased by property firm Gecina, with advice from DTZ, and has met a series of France’s HQE standards by using sustainable construction products and methods.

The year-on-year

increase in prime retail

rents in 2011– the

largest growth since

2007. Hong Kong is the

most expensive office

market in the world, in

terms of total occupancy

cost, just ahead of

London’s West End.

LHT TOWERThe supply of high-quality commercial space in the Central area of Hong Kong is extremely limited, so the redeveloped Luk Hoi Tong tower, built on the site of a 1920s theatre, attracted a lot of interest when it opened in July last year. Jones Lang LaSalle has been providing property management services for the 27-storey building, which features 10,800m2 of Grade A office space and 3,000m2 of retail space.

ANZ CENTRELocated in Melbourne’s Docklands, the ANZ Centre is the largest single-tenanted commercial office building in Australia. The 130,000m2 scheme is arranged like a campus building, with a publicly accessible ground floor featuring cafés, a visitor centre and art gallery. The addition of efficient energy, water and waste management facilities gained the building a 6 Star Green Star rating from the GBCA in 2010.

The amount of floorspace under

construction in the CBD and Docklands

area. The investment market in

Melbourne has been booming in the

past few years, with a record value of

transactions in 2010.

04.12 // MODUS 25

US$400bnThe amount (£254bn) of direct investment into commercial real estate in 2011, a 25% increase on 2010.

MODUS_April_P24-25_investment_v4.indd 25 19/03/2012 14:54

26 rics.org

Cutting costs//

BUY OFF THE SHELFSome 30% can be shaved off the full cost of building a school by using a design ‘made earlier’. Equally appealingly, the approach gives clients the holy grail of cost certainty from day one. The technique is being developed by a number of contractors, but an ‘off the shelf’ project at Oakfield Primary School in Rugby, Warwickshire, is understood to be the first to have made it to site, after breaking ground in early February.

The design for an extension to the existing building was bought from Sunesis, a joint venture between Willmott Dixon and the local-authority-controlled Scape, launched to meet the government’s drive to cut construction costs. According to Steve Elkin MRICS,

Scape manager at Willmott Dixon, Sunesis delivers primary and secondary schools at a cost per pupil of £8,500-£10,000, compared with a typical cost of £15,000-£20,000. ‘The savings accrue because clients do not have to pay architectural fees – we’ve already invested in a number of designs that they can choose from,’ he says. ‘We also use contractors on the Scape framework, saving procurement costs.’

In terms of design quality, ‘There is a view that standardisation is a cheap solution, not a quality solution,’ says Elkin. ‘That’s simply not the case. Sunesis is all about getting the quality right in the first place within the basic model. So, for example, all our classrooms are 60m2. Clients can then choose from a range of optional extras depending on their budget, which means the building can be tailored to meet a school’s specific needs. Design Council CABE has just assessed the Keynes model, saying it offers a beneficial approach, and we hope this positive third-party endorsement will go some way to changing the perception around standardisation.’

Sunesis has a further two schools in planning and another about to go in for planning consent. It plans to offer standardised designs to the wider public sector, too, with leisure centres soon to be available.

FROM SPRAY PAINT TO SPACE RATIONALISATION, ROXANE MCMEEKEN ROUNDS UP SOME INSPIRING EXAMPLES OF EFFICIENCY AND INNOVATION

MONEY-SAVING

IDEAS

MODUS_April_p26-31_Money-saving_v4.indd 26 20/03/2012 12:35

04.12 // MODUS 27

WORK SMARTER How many developers fit out an office building before signing up tenants, right up to completing M&E services, internal wall finishes and even furnishings, only to see it all stripped out by the incoming occupier? This traditional category A office fit-out may soon be consigned to history if a new, less wasteful approach named ‘smart cat A’ catches on.

Architect Pringle Bandon is among the pioneers. Partner William Poole-Wilson says the approach can save 5-11% on construction costs, ‘no small beer when you think that this could easily cover your design fees’. Under smart cat A, refurbishment happens on a rolling basis, floor by floor, saving time and money. The main services are completed as a show floor to attract tenants, who are then free to continue with their own fit-out, removing the need to strip anything out.

This typically dispenses with up to 20 weeks’ work – the landlord usually spends three weeks stripping out, five weeks installing services and three weeks adding floors and ceilings, then the tenant comes in and starts again, which takes a further six weeks on average. A further benefit is that the developer’s and tenant’s teams are encouraged to work together. ‘It’s about looking at budgets and working out how things could be done better for everyone’s benefit,’ says Poole-Wilson.

Developer MGPA is understood to be adopting the approach on its Exchange Tower scheme in London’s Docklands. MGPA acquired the 250,000ft2 building in June 2010 for £134.6m and is currently refurbishing and marketing the property.

MAKE DOInstead of knocking down a tired 1980s office block, developer Derwent London commissioned

architect AHMM to conceive an inspired refurbishment, which cost half the price of demolishing and rebuilding – and was shortlisted for the RIBA Stirling Prize 2011. The resulting Angel Building has been

re-clad, re-landscaped and even re-orientated to bring it up to date with modern standards and add 100,000ft2 of lettable space. ‘Flattening the existing building would have entailed huge planning

challenges as it’s in a sensitive area, so we saved a year or two in planning,’ says David Thurston MRICS, a project manager for Derwent. ‘Demolishing and rebuilding the substructure would have added three to six months and 15% extra cost to the programme.’ The scheme delivered a slew of environmental savings, too, including 7,400 tonnes of CO2 – equivalent to running the building for 13 years – that would

have been created by a new-build, and 30,000 tonnes of material spared from landfill.


28 rics.org

BE FLEXIBLE Fostering flexible working while reducing office space is becoming an increasingly popular money-saving

solution for organisations in the economic downturn. One of the projects that pioneered the strategy was for the Department for Communities and Local Government (DCLG), which saved £4.5m a year in operating costs

under a space rationalisation programme created by cost consultant Turner & Townsend and working environment interior design specialist BDG. The 18-month project began at the start of 2007 and cost £4.68m

– meaning the payback for DCLG came in a little over a year later. ‘The cost of an average desk in London is £10,000 a year,’ explains David Mathieson, director at Turner & Townsend, who says it’s not uncommon to see an

organisation using only 50% of its desks. The team undertook a detailed study of how staff worked and found that the department’s dispersion over four sites was wasting time because employees had to move between

buildings, including passing through security at each entrance, whenever they needed to meet up. They developed a programme to concentrate them in two modernised offices, which would eventually be further

downsized into one site, Eland House in London’s Victoria. Space rationalisation was one thing, says Phil Hutchinson, managing director at BDG, but a culture change was needed to support it. ‘We had to encourage

people to take advantage of what had been set up – to be more collaborative, have more meetings in the open-plan areas and move around more, using laptops rather than having their own personal space,’ he says.


Cutting costs//

THINK LATERALLY Providing cost consultancy on a large mixed-use masterplan, Faithful+Gould came up with an approach that cut the project’s capital costs by 50%. The brownfield site suffered from sporadic flooding from a nearby river, and the design team had planned to provide a retaining wall to act as a barrier – until Faithful+Gould suggested an alternative. ‘The idea was to excavate the river bank to create an additional ‘run-off’ area for the water, and use the excavated material to create a landscaped bund to further protect the site from water,’ explains regional director Alastair Kenyon MRICS.

This created ‘a flood alleviation strategy as opposed to just a flood defence strategy’, which was looked upon favourably by the Environment Agency. Meanwhile, using excavated material for the bund was more economical than constructing a new retaining wall, and the client preferred the ‘soft’ landscaping approach. The scheme, completed recently, will continue to deliver cost savings over its life cycle thanks to lower maintenance requirements.

BUILD A MONEY-SAVING MODEL Consultancy Mott MacDonald has been appointed by NHS East Midlands to deliver £1.3bn of savings by

March 2015 under the national Quality, Innovation, Productivity and Prevention (QIPP) programme. A range of complex initiatives are under way, from macro-level change such as creating a specialist major trauma centre

for the region to creating forums for health organisations to share best practice. To coordinate it all, the firm has created a programme management office, supported by its own software to facilitate transparency and

share information. ‘By integrating QIPP projects together with lessons learned within the information structure in a transparent and accessible way, other parts of the organisation began to innovate and improve

productivity and create new savings,’ says Laurence Wells, Mott MacDonald project manager. ‘As a result, as well as knowledge about the structure and outputs of the QIPP programme being transferred and retained

in the organisation’s collective memory, the principles and momentum of the programme are sustained and built upon.’ The project is on track to hit target, with £212m of savings achieved since launch in 2010.

FAKE IT Plans to extend London’s Dorchester Hotel into a nearby building, 45 Park Lane, were in jeopardy when rising commodity prices meant that the proposal to re-clad the otherwise unremarkable 1960s building in rippling cast bronze would blow the budget, coming in at more than

£1m. Then the project team discovered that the same effect could be achieved with a metal spray-painting technique by California-based LuminOre – for about half the cost, at £315,000 for the panels and £190,00 for transport, scaffolding and fixing.

A specification from the interior designer for back-lit bathroom panels made from onyx also looked unaffordable, working out at £10,000 for each of the building’s 45 rooms. Then, says Andrew Davidson, managing partner at the scheme’s executive architect, Paul Davis + Partners, ‘We found a London manufacturer, Spanlite, who could produce an extremely high-quality panel in printed back-lit glass, which had the same effect but cost only £4,000 per room. Both techniques were great examples of innovative product development saving money.’

Imag

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am P

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Pau

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s Arc

hite

cts

04.12 // MODUS 29


30 rics.org

TAKE A DIFFERENT TRAINA new rail scheme in Amsterdam could cost 40% less, mainly due to changing the type of train

proposed. Franklin & Andrews is cost consultant on a plan to use lightweight metro rolling stock instead of the heavy, standard trains originally planned, and to use surplus capacity on existing lines

that are currently not at their maximum. In this way, the construction cost of the 20km, seven-station M55 IJmeer Line from Amsterdam city centre to the suburb of Almere could be cut to €2.9bn (£2.4bn). ‘While the funding of the project is still to be agreed, the government said that the original €5bn price

tag was too high, so we used a multidisciplinary approach to reach a value engineering solution,’ explains Martijn Donders, senior project manager at Franklin & Andrews’ parent company Mott

MacDonald in the Netherlands. The proposal has been selected by client Werkmaatschappij Almere-Amsterdam and will be submitted to the Dutch parliament for approval later this year.

Cutting costs//

CHANGE THE LIGHT BULBSFor the fit-out of its new City of London office, law firm Clyde & Co saved 17% in lighting life-cycle costs by commissioning a bespoke solution from manufacturer Future Designs. Instead of opting for a standard overhead system, the lighting is installed on top of wall-mounted cabinets, with a strip of low-energy LED beneath to ensure there are no shadows on workers’ desks. The fluorescent lamps sit inside an aluminium semicircular reflector, which is coated with a resin powder to maximise reflectiveness. The patented Kurv lights will deliver savings on maintenance, as facilities managers simply need to reach on top of the cabinets to replace bulbs rather than taking down the ceiling. Says David Clements, managing director of Future, ‘This shows that you can make a massive saving with one small change.’

SPEND NOW, SAVE LATER As project manager, QS and sustainability adviser on an affordable homes project in the South East, John Rowan & Partners came up with an ingenious plan to save £780,000 – and be greener in the process. The client was refurbishing four three-storey blocks containing 119 residential units constructed between 1977 and 1981. The initial survey showed that the flat roofs, with a combined area of 6,900m2, had reached the end of their useful lives and would have to be replaced with a new system with a life expectancy of 20 years, at a cost of £640,000.

‘We suggested the alternative of installing a pitched roof system, with a 60-year life and photovoltaic cells,’ explains managing partner Stephen Gee MRICS. The total cost was higher: £1.14m, including £175,000 for the PV cells. But, says Gee, ‘Even treating everything at today’s prices, to replace the flat roof three times over the 60-year life of the building would have cost £1.92m, so our plan brings a saving over the life of the building of at least £780,000.’

The client benefits further through selling the green energy produced by the solar roof back to grid under the government’s Feed-in Tariff (FIT) scheme. Originally, this would have saved an estimated £17,500 a year in energy costs, meaning the PV would pay back in 10 years. Although changes to the FIT currently under way may reduce this, the new approach still brings huge benefits. ‘We were not originally tasked to do a review and I’m sure the client would have proceeded with a straight replacement and the cheapest up-front capital option,’ says Gee. ‘But the new solution is a more cost-efficient and sustainable building over its life.’

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Portfolios • Buy to Let • Unoccupied

Blocks of Flats • Multiple Tenure • Commercial Property

If you are a Property Owner, Mortgage Broker, Estate AgentFinance Broker or Solicitor talk to us today about your business.

Buy online now atwww.propertyquotedirect.co.uk

or call us on 0800 515 381

Maximiseyour profits!

Landlords Insurance Specialist


Profile//

32 r ics.org

People said I was mad when I set up Igloo in 2001. They thought this ‘investing in sustainability business’ would never get going. But I had been involved in regeneration projects since the 1980s, and could see the value in reusing old buildings in rundown areas on the edge of cities rather than knocking them down and starting from scratch. That’s what the public sector prefers to do because it’s easier, but the point of Igloo is to invest money into high-quality, innovative rebuilding to help economically declining communities. It means creating neighbourhoods where people want to live and work, benefiting local people as well as long-term investors. Sustainability and energy efficiency are part of this.

I did a degree in land economics at Cambridge and got my RICS qualification, then was lucky enough to be in the right place at the right time early in my career in the 1980s, when there was a lot of new regeneration work happening. I worked for Arrowcroft, a property and investment company, on the Merseyside redevelopment in Liverpool, and later for AMEC on the rebuilding of Manchester city centre. Most of the cities I’ve worked in, I’ve also lived in; to me it’s important to understand what it’s like to live somewhere when you’re involved in a project in that place.

Igloo’s focus is on the top 20 cities in the UK, so I spend much of my week travelling from one city to another. In a typical week I might jump on a train to Nottingham or Manchester, or it could be Glasgow or Birmingham. At Igloo we run our business a little differently to most – we don’t have hierarchies or daily office hours. I move around a lot, so I like to work in ‘coffices’ – my favourite coffee bars, mostly near stations, where I have meetings with our public sector partners or the people running the projects. Although there

‘ is almost no private investment in regeneration at the moment, we are still developing, for example through our sustainable investment fund, Blueprint, which is owned by Igloo Regeneration Fund and the government’s Homes and Communities Agency, and is responsible for creating exemplar regeneration in the East Midlands. Blueprint has become the model for JESSICA (Joint European Support for Sustainable Investment in City Areas), which is designed to keep regeneration going. It involves a relatively new process that takes money from European regeneration funds. Igloo runs Chrysalis, the Merseyside part of the North West JESSICA fund.

I’ve been chair of RICS’ Regeneration Policy Panel and held the Europe regeneration role, which was fascinating because I got to see and learn from some of the amazing things they’ve done in places such as the Western Harbour in Malmö, Sweden. When you have a regeneration investment structure that works, you can completely transform an area’s economic prospects. At the moment I live in lofts above our offices in Manchester, and in Bermondsey in London, where we’ve been working in partnership with Southwark Council, the London Development Agency and the local community to create a mixed- use development including an art-house cinema and boutique hotel as well as private and affordable housing.

The property industry has been quite slow to change but developments are happening with more vision now. Acting in the public interest is embedded in Igloo and I’m a very big advocate of the surveyor’s role being for the public good. In my view the property industry is really important in making the world a better place, and I feel that, in a small way, I can contribute to that. It’s what gets me up in the morning.igloo.uk.net ’‘A regeneration investment structure that works

can transform an area’s economic prospects’

MODUS_April_P32-33_Profile.v5.indd 32 19/03/2012 15:36

1o minutes with…

Igloo Regeneration

Interview by Cherry Maslen Photograph by Victoria Birkinshaw

CHRIS BROWN

Chris Brown FRICS is CEO of the Igloo Regeneration development team, and director of Isis Waterside Regeneration and Blueprint

MODUS_April_P32-33_Profile.v5.indd 33 20/03/2012 12:39

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34 r ics.org

MODUS_April_P34-35_Law.indd 34 19/03/2012 15:39

Law advice//

Changes to

THE REIT REGIMEIllustration by Mitch Blunt

04.12 // MODUS 35

Real estate investment trusts (REITs) have been with us for fi ve years now, and the proposed changes to the regime from July are the most signifi cant so far. The amendments should greatly increase their attractiveness to a wider pool of property investors and providers of capital, and the government hopes that these changes will encourage more capital to be invested in the built environment in the UK, particularly in residential property.

A REIT is a company that satisfi es various conditions and, in return, is exempt from tax on the rental profi ts and capital gains of its property rental business. REITs are therefore tax effi cient for shareholders because there is only a single layer of tax on rental profi ts and capital gains (at shareholder level). The conditions the company must satisfy include being listed, suffi ciently diversely owned, having 75% of its profi ts and assets relating to its property rental business,

and distributing 90% of its rental profi ts. Currently, an entry charge of 2% is levied on the value of the company’s property rental assets when joining the REIT regime. In addition to tax-exempt rental income and capital gains, benefits include access to the global REIT ‘brand’ and to the

signifi cant sources of international capital allocated purely for investment in REITs, a competitive pricing advantage on corporate acquisitions, and the ability to make divestment decisions in a tax-free environment.

One of the most signifi cant changes to be introduced from July is the abolition of the 2% entry charge. This may encourage offshore property investors to come onshore, as it will no longer cost them 2% of the property value to convert. There will also be a relaxation of the diverse ownership rule for institutional investors, meaning that a small ‘club’ of institutional investors could own a REIT, therefore widening their appeal. ‘Institutional investor’ includes pension schemes, insurance companies, unit trusts, open-ended investment companies, all of their overseas equivalents and sovereign wealth funds. The relaxation may pave the way for overseas institutional investors and sovereign wealth funds to use REITs as their UK property investment platform. It is disappointing, however, that charities and registered housing providers are not currently included on the list.

Then there’s the proposed three-year grace period for new REITs to meet the diverse ownership requirement.

This will enable start-up or closely held/family-owned REITs to build sufficient reputation to attract new shareholders, without prejudicing their ability to enjoy the benefi ts of the REIT regime while they do so.

The relaxation of the current requirement for a REIT to be listed on a ‘recognised stock exchange’ is also welcome. The proposals will enable AIM and PLUS market (and overseas equivalent) traded companies to obtain REIT status without requiring, for example, a full London listing. However, one major shortcoming of the proposals is that the REIT’s shares will need to be ‘traded’ on the exchange each accounting period, even though it may be 100% owned by institutional investors or by a small number of investors during the three-year grace period.

Finally, there are a number of technical improvements to the regime, including a redefi nition of ‘fi nancing costs’ for the REIT interest cover test and for cash to be treated as a ‘good’ asset for the ‘balance of business assets test’, which will make the regime much more user-friendly.

The government is also looking into proposals to introduce mortgage REITs and social housing REITs into the UK. Mortgage REITs are well developed in the US, and it is thought that in the UK they could take on existing bank loans and therefore free up lending capacity and potentially provide a new source of capital to the mortgage market. Many of the diffi culties faced by residential REITs, such as the need to ‘churn’ property (a ‘bad’ activity for REITs) and problems meeting the interest cover ratio because of low net-rental yield, would also face those wishing to form social housing REITs. The question of whether grant funding would need to be repaid on a transfer of housing association stock to a REIT also remains unanswered.

Although there are still areas in need of clarifi cation, and some of the changes do not go far enough, the government’s proposals for REITs should change the UK property landscape as we know it – and for the better.

PHIL NICKLIN is a Deloitte real estate tax partner and was one of the main architects of the REIT regime. deloitte.com/uk

IT IS HOPED THE CHANGES WILL ENCOURAGE MORE CAPITAL TO BE INVESTED IN THE UK, PARTICULARLY IN RESIDENTIAL PROPERTY

MODUS_April_P34-35_Law.indd 35 19/03/2012 15:39

36 rics.org

Private fi nance//

MODUS_April_P36-41_PFI+Advice_v7.indd 36 19/03/2012 15:42

04.12 // MODUS 37

Since its introduction in 1992, the Private Finance Initiative (PFI) has delivered around 1,000 infrastructure projects in the UK. Its cousin, the Public Private Partnership (PPP), has been copied in much of Europe, the Middle

East, North America and Australia. Yet criticisms persist about the scheme’s value for money. In the UK, PFI is grinding to a near halt. But the need for new public infrastructure cannot be doubted. Ernst & Young estimates that a staggering US$50tn (£30tn) of new infrastructure is needed worldwide in the next 25 years, consuming 3.5% of global GDP. The OECD (Organisation for Economic Co-operation and Development) stresses the obvious: this is beyond the capacity of national governments to fi nance.

Infrastructure is a particular problem for the UK. As recently as 2005, the World Economic Forum ranked it as having the ninth best infrastructure in the world. It is now 33rd. The government’s National Infrastructure Plan, published in November, concludes that the UK needs more than £250bn of investment in 500 key infrastructure projects – of which two-thirds must be privately fi nanced. Priority schemes include many transport projects to be commissioned by the public sector. But there is now an acceptance that the UK’s main private fi nancing vehicle for public infrastructure, the PFI/PPP model, is not ‘fi t for purpose’.

The House of Commons’ two most powerful select committees, the Public Accounts Committee and the Treasury Committee, have strongly criticised PFI, with both concluding that it is not providing value for money. The Treasury Committee complained that other procurement models were not properly considered, with the

desire to push fi nance ‘off balance sheet’ being decisive. Although most PFI schemes are now counted in the national accounts, the Treasury Committee was clear that minimising the public sector net debt had boosted the use of PFI in the past. The committee’s adviser on its PFI enquiry was Mark Hellowell, a public policy lecturer at the University of Edinburgh. ‘If you took away the accounting considerations and thought about the economics, you might question whether private fi nance should be there at all, and then you would think about other structures for delivering projects on cost and on time,’ he says.

The accumulated value of PFI commitments now stands at £131.5bn. According to the Public Accounts Committee, this is four times the value of the assets procured. The difference is accounted for by the inclusion in contracts of facilities management and other services, and the high cost of private fi nance. Signifi cantly, one of PFI’s strongest critics now occupies the most important fi nancial policy role of all: chancellor of the exchequer. In opposition, George Osborne told the Observer, ‘The government’s use of PFI has become totally discredited, so we need new ways to leverage private sector investment.

‘Labour’s PFI model is fl awed and must be replaced. We need a new system that doesn’t pretend that risks have been transferred to the private sector when they can’t be, and which genuinely transfers risks when they can be… The fi rst step is transparent accounting, to remove the perverse incentives that result in PFI simply being used to keep liabilities off the balance sheet.’

Given such strident criticism, it was inevitable that the Treasury would review the use of PFI. That review was launched last year and completed its consultation in February. It is seeking ways of reducing the cost of PFI; attracting a wider >>

PRIVATE SECTOR PRIVATE SECTOR INVESTMENT IS CRUCIAL INVESTMENT IS CRUCIAL

TO MEETING THE UK’S INFRASTRUCTURE INFRASTRUCTURE

NEEDS. BUT IS IT TIME NEEDS. BUT IS IT TIME FOR A NEW APPROACH?FOR A NEW APPROACH?

Words by Paul Gosling


range of fi nancing sources; improving the balance of risk and reward between the public and private partners; reducing the costs of procurement (it costs £12m to bid for a hospital contract); building on the success of PFI in delivering projects on time and on budget; and improving scheme transparency.

‘I am a bit surprised by the scope of the review,’ admits Hellowell. ‘Initially I thought that it would be a rebranding exercise like that in Scotland, where you make some fairly minor changes, give it a new acronym and the criticisms die away – which is what has happened in Scotland. But everything is being considered, including abolition of all forms of private fi nance for infrastructure. I think they are serious about meaningful reform.’

The biggest challenge is to fi nd a model that delivers the necessary fi nance at reasonable cost. Scheme costs have risen substantially during the economic crisis: banks are looking for interest rates of 7%, compared with the 2% that the UK government is paying on some recently issued gilts. And the supply of banking fi nance is anyway now very thin. Rates of return on PFI equity is another problem – some shareholders have generated 70% returns. ‘So the government… must diversify the market for project debt and get pension funds and insurers and maybe even sovereign debt involved,’ says Hellowell.

Solutions may be needed, but they are not simple, explains Nick Prior, head of infrastructure and capital programmes at Deloitte. This is especially true, he suggests, as Osborne’s pre-election criticisms of PFI have painted him into a corner. ‘If there was ever a time a chancellor could do with off-balance-sheet fi nancing, it’s now,’ he says. ‘He wants money for infrastructure. But he closed that opportunity down with his criticisms of PFI as an off-balance-sheet ruse. And he is going to be pushed to take risk [for the public sector] out of PFI projects, rather than increasing risk.’

While Osborne would like pension funds to step in to get the infrastructure sector going again, this is not realistic at present, believes Prior. Moody’s threatened downgrade of the UK’s credit status

38 rics.org

in February makes it even less likely that the government will support any easing of public spending. So for the next year or so, the ‘pipeline’ of projects needed to get pension funds to commit to the sector will not materialise. PwC’s Paul Davies agrees. ‘The government is talking about changing the structure. The market is happy to look at alternatives, but you need deal fl ow for a new structure, and at the moment there isn’t the deal fl ow to try new structures,’ he says. ‘It’s a nice idea to get pension funds involved, but without deal fl ow will they get involved on the scale needed to interest them? At the moment the government isn’t doing new infrastructure projects.’

Some funds are keen to be involved. Mike Taylor is chief executive of the London Pensions Fund Authority (LPFA), which invests about 5% of its active funds in infrastructure. ‘To my mind, infrastructure is a good asset class,’ he says. ‘We are interested in stable, long-term returns.’ However, most of LPFA’s infrastructure investment is outside the UK, because of the lack of suitable vehicles here. Taylor hopes the Treasury review will generate these. ‘Discussions are reasonably advanced,’ he says, but he doubts if this will lead to anything practical in under two years.

SHARING IDEASProfessor Alastair Adair, pro vice chancellor of the University of Ulster, co-authored the RICS research report The Future of Private Finance Initiative and Public Private Partnership. He believes that the issues affl icting PFI and PPPs in the UK represent a serious problem for surveyors and the construction sector. ‘It’s pretty grim,’ he says. He believes a stronger evidence base would assist in deciding policy. ‘We can’t have any objective feel for the value for cost from the UK experience, whereas other countries are able to deliver them much faster and appear to have a better handle on value for cost.’ Accordingly, the next RICS research project from Professor Adair and his colleagues will examine value for cost, comparing PFI with conventional procurement. >>

Private fi nance//

Portugal has116 PPP contracts, 80% of them for transport schemes. Total liabilities are around €25bn (£20bn), representing over 14% of national GDP. The OECD said Portugal used PPPs to ‘shift too much fi scal risks to future generations’, and concluded that the country had not invested suffi ciently in public sector procurement capacity to extract maximum value. The World Bank agreed, and said that ‘Portugal’s early

PPPs were subject to constant delays and cost overruns’ and ‘insuffi cient risk transfer to the private sector’.

To reduce costs, the government accepted a high degree of risk. When economic weakness caused borrowing costs to rise and road toll income to fall, project costs rose substantially. The IMF warned that the triggering of contingent liabilities represented ‘signifi cant fi scal risks’ in such cases.

Portugal has agreed to suspend its use of PPPs, pending the outcome of an expenditure review. This may lead to higher service user charges such as increased tolls – but motorists may be unable or unwilling to pay these. Although PPPs are not included in government debt, the burden of meeting the fi nancial liabilities imposed by them is regarded as a factor in the dire state of Portugal’s public fi nances.

:PORTUGAL A RISK TOO FAR?

Sources: RICS Research: The Future of Private Finance Initiative and Public Private Partnership; Committee of Public Accounts: PFI in Housing and Hospitals and Lessons from PFI and other projects; Managing PPPs for Budget Sustainability by Mariana Abrantes de Sousa, PPP Lusofonia, Portugal

Private fi nance


04.12 // MODUS 39

ALAN COAKLEY MRICS PJ Hegarty & Sons

‘As contracts manager on the construction of the Criminal Courts of Justice in Dublin, a £125m PPP project led by Amber Infrastructure, I was responsible for project delivery from tender stage through to successful handover. This was my fi rst experience of working on a PPP project and, as a result of our eff orts, the 25,000m2 building was completed three months ahead of schedule in November 2009.

‘The development of open communication among all parties was key to its success. I coordinated the design and construction teams, led buildability reviews, managed the contract and project costs, and ensured compliance with contract conditions, regularly reporting back to all stakeholders. With up to 500 personnel on site, managing industrial relations and health and safety was also important.

‘There is a lot more risk placed on the design and build contractor in a PPP project than one procured through a traditional route, such as meeting the requirements of the output specifi cation, managing the expectations of the project stakeholders, and the high liquidated and ascertained damages for late completion. However, there are usually minimal changes from the client and, in my experience, although the design review process can be onerous, the early sign-off of designs, mock-ups and samples usually results in a higher-quality project. Another diff erence is the preparation of cash fl ow at tender stage, as this is the vehicle used for making payments to the contractor throughout the construction period.

‘I believe the PFI/PPP procurement route has a viable future. The requirement for the PPP company to be responsible for the performance of services and availability of space for 25 years post-construction means that projects are often designed with sustainability in mind. Also, spreading the site, design and construction costs over a long period allows the government to procure projects in times of economic hardship, creating immediate employment in the process.’pjhegarty.co.uk SOURCES: Committee of Public Accounts: ‘PFI in Housing and Hospitals’ and ‘Lessons from PFI and other projects’

£30bnCURRENTCAPITALEXPENDITUREPER ANNUM ONINFRASTRUCTURE

IN THE UK

THE RISE IN COST OF A TYPICAL PFI PROJECT SINCE THE CREDIT CRISIS

6-7%34 THE AVERAGE NUMBER OFMONTHS THE PPP TENDERING PROCESSTAKESIN THE UK

13,000THE NUMBER OF HOMES BUILT OR REFURBISHED THROUGH PFI

THE CURRENT NUMBER OF PFI PROJECTS IN THE UK. ANOTHER 61 ARE IN PROCUREMENT

700

£434bnTHE ESTIMATED INFRASTRUCTURE REQUIREMENTS FOR THE

UK TO 2020

£7bnTHE PEAK OF THE UK PPP MARKET IN CAPITAL VALUE TERMS IN 2006

76THE NUMBER OF OPERATIONAL PFI HOSPITALS IN ENGLAND BY APRIL 2009

£30bnCURRENT

THE RISE IN COST OF A TYPICAL PFI PROJECT SINCE THE CREDIT CRISIS

6-7%

£434bnTHE ESTIMATED INFRASTRUCTURE REQUIREMENTS FOR THE

UK TO 2020

£7bnTHE PEAK OF THE UK PPP MARKET IN CAPITAL VALUE TERMS IN 2006

PER ANNUM ONINFRASTRUCTURE

IN THE UK

13,000THE NUMBER OF HOMES BUILT OR REFURBISHED THROUGH PFI


40 rics.org

RICS worked closely with Infrastructure UK (IUK) and a joint research team from the Universities of Ulster and Aberdeen to respond to the call for evidence on PFI reform in February. Three roundtables were held with members on whole life cycle costing, procurement and risk allocation – all key areas of member expertise. The themes for each roundtable were developed with IUK, and a member of the PFI reform team attended each event, putting RICS expertise right at the heart of policy development.

The key recommendations from RICS were: The use of RICS’ New Rules of Measurement

1-3 in all contracts to help standardise cost data, facilitate regular benchmarking and deliver cost savings in both the construction and operational phases.

Improved training and development of public sector facilities managers, and building a more strategic facilities management profession to deliver signifi cant effi ciencies and value for money throughout the life cycle of an asset.

The establishment of a central agency to share and retain expertise and knowledge, generating better, more robust data and a continuous improvement loop.

Future private fi nance models to allow for greater fl exibility in the contract repayment structure to incentivise innovation and value for money.

A multi-agency approach to risk management to help spread risk, share expertise and deliver cost savings for the public and private sectors.

The PFI reform team will use this detail to help develop the second stage of research later this year. RICS will also continue to build on its relationship with IUK as it develops new models for infrastructure funding.rics.org/pfi

The UK should now copy the US, suggests Adair. ‘America has gone for a Keynesian approach, to spend its way out of recession,’ he says, ‘and the economy is showing signs of growth on the back of that investment. America is the only global location in our study which has actually increased the amount of money going into infrastructure.’

Darren Crocker of Gleeds management and construction consultancy judges the PFI/PPP sector in the UK to be ‘on the decline, signifi cantly’. He warns that this risks the UK losing its capacity to deliver major projects. ‘It is indicative that, at the moment, skills built up over the years are now being diverted overseas,’ he says. ‘That sums up the state of the market. No one is going to sit around waiting for the next iteration of PFI to come along, as it surely will.’

And there are international markets calling for the necessary skills to be deployed. ‘It’s quite a valuable export from the UK to other countries,’ says Crocker. ‘We have seen a lot of projects in other countries, like Canada, Europe, Australia, America, which is using its P3 for a number of quite signifi cant infrastructure schemes, and the Middle East. They all have their own take on it, but they are all based around the PPP principles.’

Turkey has become one of the most important markets, says Wolfgang Schlicht, head of PPP Europe at EC Harris. ‘Turkey is using PPPs in the health sector, for new motorways and for

bridges,’ he explains. ‘My question is whether this is really bankable. These are projects awarded and under construction, including a huge hospital. But they still have no fi nance.’ But, he adds, the eurozone crisis is damaging the sector in much of Europe. ‘Spain was leading in recent years, but it is decreasing now because of the problems. It was the biggest country in Europe for PPPs. France was always strong, with motorways and schools. Italy was strong, but not so much now.’

The UK may have exported PPPs to much of the world, but the fi nancial crisis hanging over the infrastructure sector in the UK is also spreading across most of the globe. The paradox is that greater infrastructure spending could trigger economic recovery, as seems to be happening in the US, yet the priority for many governments is paying down debt. And that is very bad news for infrastructure renewal, the wider economy and for surveyors and the rest of the construction sector.

PAUL GOSLING is a journalist and broadcaster specialising in public sector fi nance, and is a regular columnist for The Independent.

Private fi nance//

‘The market is happy to look at alternatives, but at the moment there isn’t the deal fl ow to try new structures’

Insight

‘RICS AT THE HEART OF REFORM’ Mary Thorogood RICS Parliamentary Aff airs Manager

Private fi nance//

‘The market is happy to look at alternatives, but at the moment there isn’t the deal fl ow to try new structures’

AGREE? DISAGREE? Share your views on public and private sector investment by emailing [email protected] or tweeting @modusmag.


How to successfully

APPLY FOR AN OVERDRAFT

Business advice//

04.12 // MODUS 41

Illustration by Mitch Blunt

Before you approach your bank for an overdraft or a loan, you need to do some preparatory work. Figures released by BRDC Continental on the quarterly SME Finance Monitor reveal that 21% of businesses applying for an overdraft did not receive it. Of these, 5% took other funding instead, but 16% had no fi nance offered to them. So what can a business do to improve the chances of a successful application for lending?

An overdraft is a borrowing facility attached to your bank account, set at an agreed limit. It can be drawn on at any time and can help you manage your cash fl ow, particularly if it varies. Depending on the nature of the funding required, a loan may be more appropriate, as an overdraft is likely to cost more for a long-term purchase. In some cases, invoice finance may also be more appropriate, although this is only available for business-to-business sales. Invoice fi nance offers ways to access working capital by unlocking the value of invoices, although interest rates and charges apply on the cash advanced. Invoice discounting allows you to draw on funding secured against

approved invoices, while in factoring you can sell invoices to your fi nancier.

An overdraft, therefore, can help you to manage day-to-day spending and cash flow, whereas loans are usually more suitable for funding specific investments.

ADVANTAGES OF AN OVERDRAFT An overdraft is fl exible – you only borrow what you need

at the time, which may make it cheaper than a loan It’s quick to arrange There is not normally a charge for paying off the overdraft

earlier than expected.

DISADVANTAGES OF AN OVERDRAFT If you have to extend your overdraft, you usually have to

pay an arrangement fee Your bank could charge you if you exceed your overdraft

limit without authorisation The bank has the right to ask for repayment of your

overdraft amount at any time, although this is unlikely to happen unless you get into fi nancial diffi culties

Unlike loans, you can only get an overdraft from the bank where you maintain your current account. In order to get an overdraft elsewhere you need to transfer your business bank account

Overdrafts may be secured against business assets The interest rate applied is nearly always variable, making

it diffi cult to accurately calculate your borrowing costs Unutilised overdraft facilities may be reduced by the

banks at short notice, although this is unlikely to happen unless you get into fi nancial diffi culties.

MAKING A SUCCESSFUL APPLICATIONYou need to have a clear idea about how much you want to borrow, how it will be used and how it will be repaid. You will need to support your application with information that the bank will request, including your past fi nancial reports, business plan and forecasts, and details of any security offered. While an overdraft is short term, you will need to be able to talk about your longer-term plans, so that the bank will appreciate its role in your business now and in the future.

A poor track record in paying back lending will, understandably, count against you. If your business has a troubled history, such as adverse data (bankruptcies, county court judgements), it’s important that you are transparent with what went wrong and can prove you have put in place measures to ensure your record is now clean.

It might be helpful to get advice from a fi nancial adviser or accountant, who are usually experienced in helping businesses apply for loans and overdrafts. Having your accountant at meetings when you apply for fi nance is also likely to give the lender confi dence in you and your plans.

Further ‘top tips’ for lending application success can be downloaded from the Better Business Finance website at betterbusinessfi nance.co.uk. The Institute of Chartered Accountants in England and Wales (ICAEW) Business Advice Scheme offers businesses a session with a participating fi rm at no cost. Visit businessadvice.com for more information.

CLIVE LEWIS is head of enterprise at ICAEW. icaew.com

YOU NEED A CLEAR IDEA ABOUT HOW MUCH YOU WANT TO BORROW, HOW IT WILL BE USED AND HOW IT WILL BE REPAID


42 r ics.org

the logo is intended to bleed off the top left hand corner of the page. the dots should line up withthe page edge, allow 3mm bleed and pull in the picture box to hide the dots.

PASSIONATE ABOUT THE BUILT ENVIRONMENT?We are … and we have been for 90 years. Our industry expertise allows us to provide specialist courses for property and construction professionals, by supported distance learning.

We offer diploma, undergraduate and postgraduate courses. Degree courses are awarded by the University of Reading and the Open University, and accredited by RICS, CIOB and other professional bodies.

• BSc(Hons) in Building Services Quantity Surveying, Building Surveying, Construction Management, Estate Management, Property Management and Quantity Surveying

• Diplomas in Construction Practice, Surveying Practice and Shopping Centre Management

• MBA in Real Estate and Construction Management

• MSc in Real Estate

• Postgraduate Diploma in Adjudication

• Postgraduate Diploma in Arbitration

• Postgraduate Diploma/MSc in Conservation of the Historic Environment

• Postgraduate Diploma/MSc in Facilities Management

• Postgraduate Diploma/MSc in Property Investment

• Postgraduate Diploma/MSc in Surveying (Graduate Development Programme)

• RICS Postgraduate Diploma in Project Management

To further your career call 0800 019 9697 (quoting ref. MD11), email [email protected] or visit our website.

MODUS_April_P42-53_Info_v7.indd 42 19/03/2012 15:54

01.11 // MODUS 09

INFORMATION :RICS NEWS :DIARY :BENEFITS :RESOURCES

RICS has published the New Rules of Measurement (NRM), a suite of documents that provide a standard set of rules, advice and best practice guidance understandable to all those involved in the cost management of construction projects. Although the NRM are based on UK practice, the requirements for a coordinated set of rules and underlying philosophy behind each section have worldwide application. And with the emergence of building information modelling (BIM), detailed measurement and description of building components is increasingly important.rics.org/nrm

NEW RULES USEFUL NUMBERSCONTACT CENTRE +44 (0)870 333 1600

General enquiriesAPC guidanceSubscriptionsPasswordsLibraryBookshop

REGULATION HELPLINE +44 (0)20 7695 1670

CONFIDENTIAL HELPLINE +44 (0)20 7334 3867

DISPUTE RESOLUTION SERVICES +44 (0)20 7334 3806

SWITCHBOARD +44 (0)20 7222 7000

IT SEEMS THAT A RENEWED SENSE OF OPTIMISM MAY BE SLOWLY RETURNING TO THE UK PROPERTY MARKET

RICS housing spokesperson Alan Collett FRICS

04.12 // MODUS 43

the logo is intended to bleed off the top left hand corner of the page. the dots should line up withthe page edge, allow 3mm bleed and pull in the picture box to hide the dots.

PASSIONATE ABOUT THE BUILT ENVIRONMENT?We are … and we have been for 90 years. Our industry expertise allows us to provide specialist courses for property and construction professionals, by supported distance learning.

We offer diploma, undergraduate and postgraduate courses. Degree courses are awarded by the University of Reading and the Open University, and accredited by RICS, CIOB and other professional bodies.

• BSc(Hons) in Building Services Quantity Surveying, Building Surveying, Construction Management, Estate Management, Property Management and Quantity Surveying

• Diplomas in Construction Practice, Surveying Practice and Shopping Centre Management

• MBA in Real Estate and Construction Management

• MSc in Real Estate

• Postgraduate Diploma in Adjudication

• Postgraduate Diploma in Arbitration

• Postgraduate Diploma/MSc in Conservation of the Historic Environment

• Postgraduate Diploma/MSc in Facilities Management

• Postgraduate Diploma/MSc in Property Investment

• Postgraduate Diploma/MSc in Surveying (Graduate Development Programme)

• RICS Postgraduate Diploma in Project Management

To further your career call 0800 019 9697 (quoting ref. MD11), email [email protected] or visit our website.


08 r ics.org

Tax increment funding

FACTS, STATS & SURVEYS

RICS news//

44 r ics.org

A new RICS report examines the tax increment funding (TIF) models that are operational in the US to identify lessons that can be learned prior to possible adoption in the UK. The report considers the manner in which TIF areas are designated, the governance and legislative

procedures necessary to set up a TIF, the variety of risk sharing schemes in operation, the success and weaknesses of the models, and the methodology used to measure performance. Using a case study approach, the key issues surrounding the introduction

of pilot TIF schemes are examined, including whether the tax revenue is sufficient to repay the debt, the funding of the upfront shortfall in income, and which party is to be held liable for any shortcomings. For further information about TIF models, visit rics.org/tif.

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ernd

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iffer

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The proportion of landlords choosing to

sell their propertyat the end of

a tenancy

more respondents expect rents to rise

rather than fall

14% The rents net balance eased from +21 in the

previous period

+13 4%

Surging demand for commercial farmland in the UK saw prices reach record levels for the third consecutive period, found the latest RICS rural land market survey. The average price per acre increased to £6,514 during the second half of 2011. Farmland has now almost doubled in value in the past five years, driven by growing interest from commercial farmers looking to expand their enterprises in order to capitalise on the strength in commodity prices. A significant imbalance between supply and demand was again evident, as land availability dropped off towards the end of 2011. With the exception of the North East and Scotland, all areas experienced rising farmland prices, with the strongest increase in the West Midlands. ‘With demand continuing to surge ahead, and a low level of land coming on to the market, it’s easy to see why prices continued to rise,’ said RICS spokesperson Sue Steer. ‘This trend is set to continue over the next 12 months. However, the outlook is mixed for farmland, which is more geared towards the residential sector, reflecting the broader national housing picture.’rics.org/rural

RICS, in partnership with Ordnance Survey and The Mersey Forest, has produced a paper on how geographical technologies are now central to understanding, planning and utilising green infrastructure resources. The paper discusses how approaches developed using geographical information systems and Ordnance Survey large-scale data have been adapted to demonstrate the value of mapping green infrastructure to a range of planning policy and development projects in Liverpool and the Mersey region. Green infrastructure planning is completely scalable, from neighbourhood street level to a regional or national level. The key at each level is an understanding of the purpose of planning at that level so the right information is gathered.rics.org/land

GREEN INVESTMENTS

FARMLAND PRICE BOOM


01.11 // MODUS 0904.12 // MODUS 45

The private individuals share of new lettings

increased

79%Overall firm tenant

demand is continuing to drive rents across

all regionsThe demand from

tenants in London, little change from

the last period

+4Highlights from the RICS

Residential Lettings Survey GB, January 2012.

Visit rics.org/economics.

+19

On 24 April, RICS is launching two new sections of the Black Book: retention and conflict avoidance and dispute resolution. The Black Book is a suite of standards providing APC students and practising

quantity surveying and construction professional group members with recommended procedures for their activities and clearly defined good technical standards. The guidance

sets a framework for the delivery of advice and services for different purposes, provides greater consistency in QS processes and promotes best practice by eliminating ambiguity.

Working to these standards gives assurance to clients and other professionals that RICS members ensure construction projects are run efficiently and cost-effectively. rics.org/blackbook

SETTING STANDARDS

As president, I receive a regular flow of correspondence from RICS members and their clients.

This week I received two contrasting letters from UK-based members that, although unrelated, together tell an interesting story.

The first concerns the perceived commoditisation of mortgage valuation work. I was asked what RICS is doing to restore a level playing field for experienced chartered surveyors who find themselves operating in a market place dominated by a few large corporate intermediaries, with only a fraction of the fee finding its way to the supplier of the professional service.

The second letter came from a veteran of the profession who has latterly been a consumer, rather than a supplier, of surveying services. His observation was that RICS members should be doing more to develop wider competence in finance and investment in order to advise on property as an investment asset. His concern is that RICS members are too reliant on traditional services and are not doing enough to broaden their skills set and the advice they offer to add real value to an increasingly savvy clientele. His comments related to real estate, but the same issues could be applied to construction or land advisory services.

So how should RICS, as a professional body, respond? There is no doubt that residential

‘RICS members need to adapt throughout their working lives to seize new opportunities’See Lian Ong FRICS RICS President

PRESIDENT’S COLUMN

and lower value commercial mortgage valuation work is a service that lenders nowadays procure in bulk as just one part of their wider credit risk analysis process. Inevitably, lenders are looking to fulfil their risk management requirements at the lowest cost. It can be argued that, by going for the lowest cost option, banks are not taking financial prudence seriously, and RICS will continue to champion the importance of high standards in valuation to both lenders and their regulators. However, as sophisticated clients, lenders will only pay more where there is a direct financial imperative to do so.

On a residential survey, RICS can make the case for greater transparency to consumers on the limitations of the mortgage valuation report, and promote the usefulness of more detailed independent condition reports. RICS can also help members, through training, to develop the financial analysis and strategic consultancy skills they need to provide higher margin occupational, investment and development advice. This would allow them to diversify away from work perceived to be commoditised.

The fact is that the world does not owe any one of us a living. Chartered surveyors are well placed to develop their businesses from a respected professional platform but we need to adapt our working lives to seize new opportunities.


46 r ics.org

RICS news//

CHINA’S CONSTRUCTION INDUSTRY

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Secret Surveyor

What is the impact of economic reform on the Chinese construction industry? RICS has published a report examining the impact of three decades of economic reform on the Chinese construction industry. The transformation in the industry has been underpinned by a shift to a market-driven system more akin to the ‘Western’ approach to achieve the government’s aim of developing a more efficient and cost-effective industry. The enormity of this change presents many challenges in terms of cost engineering education, professional development and professional standards. The changes also present many opportunities for cost management professionals within China and around the globe as the market is now open to international participation. Findings include:

Competitive bidding and the use of market prices has been introduced gradually by the government to help the industry cope with the change. A dual pricing system remains whereby contractors and cost engineers use a combination of fixed government standard norms and market rates.

The design-bid-build procurement system is the most common system used in the industry, which facilitates a traditional Western approach to pre-contract cost management.

Bills of Quantities (BQ) are widely used in the industry and required on most government projects as well as many private projects. BQs are required to be signed off by certified cost

engineers. A Standard Method of Measurement has also been developed for BQ preparation.

The consultant cost engineer is mainly used in the pre-contract cost management stage of a project.

The cost management approach and documentation used in this stage is very similar to that used under the Western system.

The report also found that the dramatic growth of the construction industry in China has placed pressure on the quality and adequacy of cost engineering certification programmes. While the China Engineering Cost Association and the Hong Kong Institute of Surveyors were involved in developing these programmes, there could be many benefits to be gained through a coordinated effort with international organisations, such as RICS, the Pacific Association of Quantity Surveyors and the International Cost Engineering Council.

RICS has made a series of recommendations based on the findings, with the most pressing need for the further development of education and training in cost management practices. The first cost engineering university course in China was introduced in 2003, whereas allied courses have been running at universities in many Western countries for well over 40–50 years. There is considerable scope for closer alliances between Chinese and Western universities to help develop the quality and suitability of courses. Read the rest of the recommendations at rics.org/research.

One of the great things about being a surveyor is that you’re not an investment banker. I say that because I spent most of my 20s as an analyst for an investment bank before becoming a surveyor, so I know the misery that working in finance entails for many. I left banking partly because I wasn’t very good at it – as a client pointed out recently, ‘You clearly weren’t very good – look at the state of the economy!’ (I suggested that the credit crisis was not entirely my fault, but he didn’t look convinced.) But mainly I left because surveying is better. There are downsides, of course – one is that I don’t have as much money as I used to. But one wonderful aspect at the moment, especially in the central London residential market, is that everyone you meet bends over backwards to be nice to you. The agent is nice, as he or she is keen for nothing to get in the way of a sale. Most of the vendors I meet, working mainly in wealthy areas of London, are baby-boomers who can’t believe their luck and are gleefully selling out, in most cases to cash-rich foreign buyers (from what I hear from friends in other firms, and read in the press, this is not unusual) and consequently are as nice as pie to me. Quite exactly what will happen when all the property in London has been sold off to millionaires from overseas (who tend to hold on to property for a long time, by all accounts) remains a mystery. But back to my point: the purchasers are also nice as they appreciate receiving my advice on the property they are about to buy. The contrast with being shouted at on a daily basis on a trading floor after making yet another expensive error could not be greater. There are exceptions to the ‘being nice to me’ rule, of course: several times recently the occupants have been renters, unhappy about being turfed out with only a few weeks’ notice and reluctant to let me in. As a renter myself, I can completely sympathise. But even though I’m now paying high rent and am not in a position to buy, it still beats being a banker. Oh, and I am sorry about the credit crisis.

Agree? Disagree? Or interested in being a secret surveyor? Email [email protected].

BEING A SURVEYOR IS SO MUCH BETTER THAN BEING AN INVESTMENT BANKER


DISCUSSION POINTS

Are building surveys fit for purpose?

04.12 // MODUS 47

As a member of Governing Council I have made it my mission to get the issue of

the residential survey and valuation looked at very closely. I will take everyone’s comments on board and bring them up at RICS HQ. There are changes under way for the

better, although these things take time. Transparency and public interest are vital areas that have not been

addressed, but are now being looked at.CHRIS GREEN FRICS

Until home buyers stop asking ‘ how little will you

charge?’ and instead ask ‘what will you do for me?’

they’ll continue to receive rubbish.

STEPHEN BREAR MRICS

My recommendations are:1. Advise a client like they’re your best friend.

2. Talk to the client before survey to manage their expectations, and again afterwards to discuss the content.

3. Empower them to make the right choice; walk away if you have to.4. Avoid defensive reporting and putting your neck on the line.

5. Don’t pay estate agents for referrals. If you do and don’t disclose it, you are probably breaking the law. Tell a client

if an estate agent refers work to you, even if there is no financial arrangement.

MICHAEL PEMBERTON MRICS

One point comes over loud and clear: clients don’t

read the terms and information sent to them before the survey takes place and,

therefore, don’t know what they are paying for. Explaining pre-survey the limits of the

inspection manages expectations, and generally clients are pleased with the

information they receive. TIM JOINSON MRICS

If you’re experienced, and provide clear, pragmatic

advice, you’ll develop a strong reputation and receive more than

enough business to charge a decent fee. Some clients want the cheapest

fee possible. I avoid them. You get what you pay for.

ROBERT DESBRUSLAIS MRICS

A recent discussion on the Which? online forum questioned the robustness of the building survey. RICS members took to LinkedIn to discuss

GOT SOMETHING TO SAY? These comments were taken from the RICS LinkedIn group. Contribute to this discussion or start your own at linkedin.com.RICS invited comments on the draft RICS Residential Building Survey Report practice note until 26 March. It is due for publication later this year. For updates visit rics.org/residentialproperty.


08 r ics.org

Benefitsrics.org/benefitsplus

In the current economic climate, many businesses and households are feeling the financial pinch, and the world of property insurance is no different.

Are insurers glad to see the back of 2011? Last year, they were looking to tighten their belts and secure underwriting profits, rather than relying on the income from returns on stock market investments. Also, while the message was ‘we are open for business’, it was very much on their terms, with talk of 5% rate increases as the norm. New entrants to the property owners insurance area kept these increases in check, but these will also be tasked by stakeholders to generate a underwriting return in the medium term.

The global insurance market in 2011 suffered significant losses, notably the earthquakes in New Zealand and Japan,

the tsunami in northeast Japan, an active Atlantic hurricane season and the floods in Thailand, Ireland, France, Italy and Brazil. The cost of these catastrophes is an estimated US$60-70bn (£38-44bn). Closer to home, the riots in the UK are estimated to have cost more than £200m, although a significant amount will be reclaimed from the government.

So what does this mean for 2012? The financial constraints of 2011 have not disappeared, and the tools in an insurer’s kit are relatively limited.Premium increases: insurers can reverse a continued period of unprofitability by underwriting the business with a greater emphasis on achieving an underwriting profit rather than just going for top line growth. This also offsets the increased

costs they face in relation to their own insurance arrangements (reinsurance). Reduced coverage: portfolios that are perceived to be at higher risk or those that have performed poorly are again likely to see an increase in rates and/or the level of retained risk (excess). Unoccupied and void properties will continue to be a concern to insurers, with many refusing to provide cover. Flood is also a concern; insurers have already seen a 200% increase in claims over the past decade. The agreement between the Association of British Insurers, which was revised following the 2007 summer floods and affects all domestic and small commercial enterprise properties built before 2009, comes to an end in June 2013. Although the immediate impact will be felt by householders and SMEs, larger organisations and property owners will also be affected, with much higher rates charged and, in some cases, cover withdrawn.

So, will the market harden and insurers get their rate increases? A robust risk management protocol will help convince insurers that the risk is acceptable. Also, the increased capacity in the property owners market means that good-quality, profitable portfolios should benefit from the rating and policy structure they deserve.

JLT is the RICS preferred partner and a specialist in real estate insurance. For more information, please visit jltgroup.com/rics or contact Gary Reed or Stewart Hunt on 0845 071 3870.

The outlook for 2012

Advertorial//

To view all the latest offers, new partners and monthly and seasonal promotions, visit rics.org/benefitsplus.

48 r ics.org


01.11 // MODUS 09

MembershipRICS is launching an accreditation scheme for professionals working in Corporate Real Estate (CRE). The global scheme will be introduced in the next six months for individuals who are already working in the field of corporate real estate – both private and public sector – either in an advisory role or as corporate occupiers.

Membership of the scheme offers CRE professionals an opportunity to gain world-class credentials in their specialist field and to demonstrate their professional excellence to clients and peers. Joining an elite group of the world’s CRE experts, members of the scheme will also benefit from exclusive global networking opportunities.

Recognising the wide skill set required by corporate real estate professionals and the importance of getting property discussed at board level, the scheme will require its members to demonstrate competence in a series of core skills including portfolio planning or strategic planning with emphasis on financial planning, delivering business objectives and change management.

‘Few property professionals work solely in one area, so this new multi-disciplinary qualification reflects the changing face of the industry,’ said RICS spokesperson Richard Deeprose. ‘RICS Associate members earn significantly more than their non-qualified counterparts and, by qualifying in a variety of sectors, they can enjoy greater, more flexible career options. While not equating to full chartered surveyor status, the qualification represents a significant first step on the ladder.’

To register your interest in joining the scheme please email [email protected]. rics.org/cre

NEW CORPORATE REAL ESTATE ACCREDITATION

04.12 // MODUS 49

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Delivering London 2012RICS has produced a film to celebrate the many members who have been involved in the delivery of the 2012 Olympic Games. In the film, we speak to some of the chartered surveyors who have played a major role at

every stage of the project since London was selected as the host city back in 2005. Their combined expertise, breadth of specialist knowledge and ability to overcome seemingly insurmountable challenges have been

vital to the success of the biggest construction project the UK has ever seen; from the bid book to planning, from venue construction to London’s Olympic legacy. Watch the 28-minute video at rics.org/olympics.

JAPANESE KNOTWEED ADVICERICS has published an information paper on the nature of Japanese knotweed, the scale of the damage the plant can cause and the main methods of treatment. The paper provides an assessment methodology to help valuers and surveyors objectively describe the scale of the infestation, allowing other stakeholders to make balanced and

measured decisions. Also, an illustrated on-site identification chart helps residential practitioners recognise Japanese knotweed during the different seasons.

The paper concludes that, while this invasive plant can be difficult to control, timely and persistent treatment programmes can minimise its impact. As the treatment industry

develops and matures, it’s hoped that residential practitioners will be able to provide more informed advice to their clients. And as lenders adopt more consistent and balanced policies, Japanese knotweed should soon become just one more consideration in the complex valuation process. For more information, visit rics.org/japaneseknotweed.


50 r ics.org

Modus_19012012.indd 1 1/19/2012 2:21:43 PM

Join us and become a member of our fastexpanding learning community at theChartered Institute of Housing

Why wait, apply today!

studyto suit your lifestyle

Distance LearningT: 024 7685 1789E: [email protected]: 024 7669 4209

Blended LearningT: 024 7685 1772E: [email protected]: 024 7642 1973

your work is our businesswww.cih.org


01.11 // MODUS 09

£90 + VAT rics.org/events

Modern Methods of Structural Masonry Repair Seminar25 April, LondonThis seminar looks at typical masonry defects and how to diagnose brick, block and stone fracture patterns, exploring modern repair systems as an alternative to traditional methods.£30 + VATrics.org/london

RICS Development Conference 201226 April, LondonSponsored by Westfield, this conference includes key speakers from LOCOG, the Olympic Delivery Authority, the Greater London Authority and leading councils, and will discuss the RICS financial viability in planning guidance note.£250 + VATrics.org/development2012

Renewing & Terminating Leases protected by the Landlord and Tenant Act 195426 April, LondonThis half-day event will cover the rudiments of the Act, together with some of the issues and procedures that arise in practice.£50 + VATrics.org/london

RICS North Awards27 April, Newcastle3 May, Manchester11 May, LeedsShowcasing the region’s top projects and inspirational regional initiatives and developments in land, property and construction.£80 + VAT (individual ticket) or £750 + VAT (table of 10)rics.org/northernevents

RICS Energy Infrastructure Conference 2012 2 May, LondonExpert analysis of the principal infrastructure divisions and the challenges the energy industry presents.£250 + VATrics.org/energy2012

RICS East of England Awards Gala Dinner10 May, CambridgeThe RICS Awards showcase the most inspirational regional initiatives and developments in land, property, construction and the natural environment. Sponsors include Price Bailey, English Heritage and Stansted Airport.Various packages.rics.org/east

RICS Building Control Conference 201224 May, LondonProviding technical guidance and a legislative update, focusing this year on the value of building control, plus other developments such as the recent building regulations. £220 + VATrics.org/bcconference

Public Contracts (Amendment) Regulations and related case law from a contractor’s perspective.£38.50 + VATrics.org/northernireland

SCOTLANDRICS Scotland Lunchtime CPD SeriesApril to June, Glasgow and EdinburghPresentations will include Dispute Avoidance, Contract Administration, Mapping Green Infrastructure and Energy Efficiency in Historic Buildings.£26 + VATrics.org/lunchtime

Rural Mid-session 19 April, Battleby Sponsored by Saffery Champness, topics to be discussed include a budget update, new diseases within forestry and Japanese knotweed.£60 + VATrics.org/midsession

INTERNATIONALRICS Netherlands Annual Gala Dinner11 April, Amsterdam, NetherlandsAnnual Gala Dinner for RICS Netherlands’ 420 members, with Vice President Michael Newey as the guest of honour.rics.org/europe

RICS Belux – Antwerp Real Estate 2012 CPD event25 April, Antwerp, BelgiumA joint CPD event, organised by RES, BVS and the City of Antwerp, with urban development as the main theme.rics.org/europe

Conference on Flood Risk Prevention26 April, Warsaw, PolandOrganised by Sustainability PG, this conference for RICS members and local governments will discuss preventing floods in Poland.rics.org/europe

EventsRICS Machinery and Business Assets Conference 201231 May, SurreyA practical guide to business growth and professional valuation standards. The programme includes speakers Professor John Ratcliffe, Nick Hood, Steve Shaw and Ronan Stack, plus a guided site tour of Mercedes Benz World.£210 + VATrics.org/mba2012

NORTHERN IRELANDIntroduction to Arbitration25 April, BelfastGuidance on how arbitrations work, how to avoid them and what to do if you find yourself involved in one.£38.50 + VATrics.org/northernireland

Remedies Regulation – 2 years on2 May, BelfastA review of the application of the

FOR RICS EVENTS BOOKINGS AND ENQUIRIES [email protected] // +44 (0)20 7695 1600

RICS NATIONAL BUILDING SURVEYING CONFERENCE 201219 April, London

Annual conference for building surveyors sponsored by Cube

Interior Solutions, offering legal and economic updates, an analysis of new Building Regulations, and technical breakout sessions on building conservation, contract administration, neighbourly matters, dilapidations and the changes to planning legislation. £220 + VAT rics.org/bsconf2012

ENGLANDBuilding Defects Part II – The Hidden DefectApril to May, various dates and locations including Newcastle (16 April), Manchester (23 April) and Glasgow (30 April)Sessions include condensation and mould, rising damp and other forms of moisture ingress, and how to observe defects. Illustrated by practical case studies.£75 + VATrics.org/events

RICS Red Book Seminars 2012April to June, various dates and locationsAn essential update on the new revisions to the 8th edition of the Red Book, and the issues and challenges currently affecting valuation.£150 + VATrics.org/redbook seminars2012

Great Western CPD Day Conference18 April, BristolIncludes an economic update, party walls, trees and the law, mortgage fraud, BIM, Red Book update, Japanese knotweed, property law update, PLA Dilapidations Protocol, communication, social media and expert witness.


Thinking of doing your doctorate?

Drop in for an informal chat with the teaching team between 12.00 noon and 6.30 pm at any of the following venues:

Manchester, CUBE, 113 – 115 Portland Street, Friday 11 May 2012

Amsterdam, Hilton Hotel, Apollolaan 138, Friday 18 May 2012

Dublin, DIT, Bolton Street, Dublin 1, Friday 25 May 2012

London, RICS, 12 Great George Street, SW1, Friday 8 June 2012

The Salford Professional Doctorate:

An achievable route for busy professionals to achieve a doctorate

Study part-time with others from similar professional backgrounds

Reduces study time by drawing on existing expertise

Distance learning, supplemented by occasional Saturday workshops

Programme starts each October

Talk to us about studying for your professional doctorate with the University of Salford, the UK’s premier built environment research centre.

See www.professionaldoctorate.eu or contact Dr Paul Chynoweth, the programme leader, at [email protected] or on 07970 392008.

SCHOOL OF THE BUILT ENVIRONMENT

MSc in I n t e r n a t i on a lC on s t r u c t i onM a n a g e m e n tAccredited by the RICS and the JBM

A high quality flexible distance learning programme for construction professionals.

It offers:• in-depthcoverageofmodernconstructionmanagement• highqualitymodularlearningmaterials complementedbyelectronicdeliveryandsupport• residentialsintheUK,Canada,Zambia and HK• flexibleentryroutesandstudytimetables• theabilitytocontinueworkingwhilestudying• accesstoanetworkofconstructionprofessionals

Applications are welcomed from graduates and professionals in the built environment. Individual modules are also available on a free standing basis for continuing professional development.

Tel: +44 (0) 1225 383850Fax: +44 (0) 1225 383255E-mail: [email protected]: www.bath.ac.uk/ace/icm

Fordetailscontact:ICM Programme AdministratorDistance Learning UnitFaculty of Engineering and DesignUniversity of Bath, Claverton DownBath BA2 7AY, UK

Advancinglearningandknowledgeinassociationwithbusinessandindustry

Now offering a 15 month ‘acceleratedstudy route’

52 r ics.org


01.11 // MODUS 09

EASTERNBenjamin Blower FRICS1921-2011, BecclesDenzil Wreford Bowyer FRICS1919-2012, IpswichMichael William Chapman FRICS1937-2011, BungayDerek Cyril Clayton AssocRICS1937-2011, FelixstoweAlan Gerrard Foskett FRICS1937-2012, WoodbridgeEdward Joseph Thurston FRICS1930-2012, Bury St EdmundsRodney Maynard Tiplady FRICS1930-2012, Letchworth

LONDONGeoffrey Frank Bateman FRICS1913-2011, BromleyPeter Stuart du Bosky FRICS1928-2012, LondonColin Arthur Naylor FRICS1924-2011, Brentford

NORTH WESTJohn Schofield MRICS1930-2012, RochdaleSimon Andrew Southall MRICS1952-2011, ClitheroeChristopher Wilkinson FRICS1954-2012, Warrington

NORTH EASTJames P Cooper FRICS1917-2011, BedalePhilip Knight Hall FRICS1945-2011, RytonSimon Charles Rowarth FRICS1963-2012, Hexham

SOUTH EASTPaul Henry Browning FRICS1932-2011, EpsomBernard Edward Cole FRICS1927-2011, RomseyAubrey George Howard MRICS1914-2012, CaterhamCyril George Howard MRICS1911-2012, RingwoodWaldemar Ian Nelson Kennett FRICS1931-2012, LeatherheadFrancis Peacock MRICS1930-2011, BedfordEric Noel Sugden MRICS1923-2011, Worcester ParkJohn Newman Taylor FRICS1919-2011, GodalmingJonathan Paul Taylor MRICS1949-2010, Milton KeynesJohn Theodore Teuten FRICS1921-2012, LittlehamptonPeter Wyton Wilson FRICS1927-2012, Witney

SOUTH WESTDonald Bilham FRICS1914-2012, FalmouthPaul Hayes Howe MRICS1928-2012, WedmoreEdward Bryan Wood FRICS1927-2011, Warminster

WEST MIDLANDSMichael Hayes MRICS1945-2011, Walsall

EAST MIDLANDSNorman C Cox FRICS1932-2011, NottinghamJohn P Graham MRICS1925-2012, Coalville

YORKSHIRE & HUMBERJohn Bellerby MRICS1978-2011, YorkMartin Christopher Browes MRICS1965-2011, HalifaxRichard Norman Cardwell FRICS1919-2011, DriffieldRonald Hudson MRICS1922-2011, GrimsbyNigel Stuart Oates MRICS1963-2012, LincolnJohn Wilson Ullyott MRICS1938-2011, DriffieldThomas Goodwin Wilkinson MRICS1943-2011, Pickering

ObituariesNORTHERN IRELANDJohn Edward Kennedy FRICS1934-2012, Lisburn

SCOTLANDRobert Graeme Geddes AssocRICS1946-2011, BarrheadJohn Elliot Hume FRICS1923-2011, Dunbar

Richard Allan Graves Porter MRICS1966-2011, EdinburghMatthew Richmon Rodger FRICS1922-2011, LockerbieJohn Fergusson Wilson FRICS1934-2011, Clydebank

WALESSilian Ivill Evans MRICS1930-2011, Llangollen

EUROPEDaniel Anthony Barton FRICS1963-2011, GibraltarEric Alfred Croucher FRICS1922-2011, Alicante

04.12 // MODUS 53

Simon Rowarth FRICS 1963-2012

A graduate of Cambridge University and qualified chartered surveyor,

Simon joined Youngs Chartered Surveyors in 1989 as assistant, and was promoted to full partner in 2000. He was an unassuming man and a highly

respected land agent, regarded by all as a wise, fair, no-nonsense adviser who gave pragmatic advice and always brought a calming influence to clients and their concerns. It was a mark of his tenacity that he was prepared to further his education and training by taking the exams of the Central Association of Agricultural Valuers (CAAV) relatively late in his professional life. He later became chairman of the CAAV Northumberland and Cumbria branch.

Simon was a talented baritone singer, an avid follower of rugby and cricket, and an indefatigable fell walker. He also had a wonderfully wry and dry sense of humour that exemplified his approach to life’s adversities. Simon died within a few weeks of being diagnosed with cancer of the oesophagus – a tragic end to a life all too short and a professional life only partly fulfilled.John Turnbull FRICS, Youngs Chartered Surveyors

Conduct rics.org/conductcases

DISCIPLINARY PANEL 11 JANUARY 2012

Andrew Gower MRICS, SurreySummary of finding: contrary to Rules 6 & 9 of the Rules of Conduct for Members 2007Penalty: reprimand x 2/fine x 2/costs/conditions


Project Management & Procurement Services Ltd, BillinghamSummary of finding: contrary to Rule 14 of the Rules of Conduct

for Firms 2007Penalty: reprimand/costs


David Loynes, CambridgeSummary of finding: contrary to Rules 3 & 9 of the Rules of Conduct for Members 2007Penalty: expulsion/costs

David A Loynes (the firm), CambridgeSummary of finding: contrary to Rules 9 & 14 of the Rules of Conduct for Firms 2007Penalty: de-registration/costs


54 r ics.org

COST MANAGEMENT AND PROJECT MANAGEMENT

Helping you deliver sustainable construction solutions to your clients. Learn through our professionally accredited distance learning masters degrees and CPD modules.

MSc SUSTAINABLE CONSTRUCTION WITH PLYMOUTH UNIVERSITY

Build a successful future,visit www.plymouth.ac.uk/sustainableconstruction

Go further with a Masters from the UK’s premier School of the Built EnvironmentFull-time, part-time and distance learning study options available. All assessment is by coursework.

Construction related Programmes:

MSc Quantity Surveying* – For aspiring new entrants

MSc Quantity Surveying (M&E)*

MSc Construction Management*

MSc Project Management in Construction*

MSc Construction Law and Practice* (LLM also available)

Property related Programmes:

MSc Corporate Real Estate and Facilities Management* – Think strategically about property investment and building performance

MSc Real Estate Development* – Learn sustainable development appraisal techniques

MSc Real Estate and Property Management* – For aspiring, new, property industry entrants

Design related Programmes:

MSc Sustainable Building Design – Explore environmental sustainability and performance in relation to buildings, including the role of digital technologies

MSc Urban Design and Regeneration – Combinesexploration of Urban Design processes and community based Regeneration practice

MSc Digital Architectural Design – Learn to apply state ofthe art, Digital and Media technologies to design

MSc Accessibility and Inclusive Design – How to improvelife for all building users

MSc Building Information Modelling and Integrated Design – Explore the full potential of BIM technologies

APPLY NOW for September 2012 or January 2013 start. PgCert and PgDip options available. We welcome applications from students without formal qualifications but significant relevant experience.* Professionally accredited

For more information visit: www.sobe.salford.ac.uk

Department of the Built Environment

Qualifications to build a careerHigh quality professionally accredited programmes delivered in a supportive and friendly environment.

n BSc (Hons) Building Surveyingn BSc (Hons) Quantity Surveyingn BSc (Hons) Real Estate Management

One-year full-time or two-year part-time study with September and January starts.

For further information:

Click: www.anglia.ac.uk/RICS12 Email: [email protected] Call: 0845 271 3333

Professional Doctorate and PhD programmes also available.

Undergraduate

These can be studied full or part-time.

n MSc Project Managementn MSc Construction Managementn MSc Sustainable Constructionn MSc Conservation of Buildings

Postgraduate

MODUS_April_P54-57_Classified.indd 54 19/03/2012 16:21

92,028 average net circulation 1st July 2010 – 20th June 2011 04.12 // MODUS 55

The May issue will be published on 7 May

Recruitment copy deadline Tues 10 April

RECRUITMENTFor recruitment advertising please contact Grace Healy +44 (0)20 7871 2667 [email protected] Dorlisa Purkiss +44 (0)20 7871 2663 [email protected]

Closing date: Monday 16 April 2012 at 2pm

A VALUATION MEMBER TO THE LANDS TRIBUNAL OF NORTHERN IRELANDEligibilityTo be eligible for appointment a person must have had experience in the valuation of land.

Salary:£120,785 per annum.This post attracts a pension under the Judicial Pensions and Retirement Act 1993.For further information please visit www.nijac.gov.uk or to request an application pack phone 028 9056 9108 or email: [email protected]

NIJAC is seeking to appoint:

3 VALUATION MEMBERS TO THE NORTHERN IRELAND VALUATION TRIBUNAL EligibilityTo be eligible for appointment a person must have at least three years’ recent experience in the assessment and analysis of housing market and land values in Northern Ireland.

Fee:£320 per day (a half day fee is payable if the sitting is less than 3½ hours).For further information please visit www.nijac.gov.uk or to request an application pack phone 028 9056 9114 or email: [email protected]

NIJAC is committed to equality of

opportunity for all who are eligible

for judicial o�ce and welcomes

applications from women and men

from all backgrounds and sections of

the community. NIJAC will appoint the

applicants who appear to NIJAC to be the

most suitable based on merit, regardless of

gender, marital status, sexual orientation,

ethnic origin, religious belief,

political opinion, disability, age or

dependant responsibilities.

RESIDENTIAL VALUATION, HOMEBUYER AND BUILDING SURVEYOR

Opportunity for contract surveyors/consultants to joina nationwide firm of surveyors. Opportunities exist in specific postcodes throughout England and Wales.

Please forward your CV and contact details by email to:[email protected]

RICSRecruit.com Check out the newly updated RICS recruitment platform. With more enhancements and user-friendly features, it caters for all your online recruitment needs. Contact Grace Healy +44 (0)20 7871 2667

Head of Rural Enterprises We are a leading estate for integrated land management and enlightened stewardship. Are you the right person to lead our rural estate enterprises and further

enhance our reputation and performance? We seek applicants who are competent leaders with strong practical experience in farming, forestry and fieldsports. Sharp commercial acumen and effective communication are essential skills. If you think this fits your profile then we want to hear from you.For an application pack please contact:Atholl Estates Office, Blair Atholl, Perthshire PH18 5TH.Telephone: 01796 481355 Email: [email protected] Or download a pack from www.atholl-estates.co.uk. Closing date: Friday 20 April 2012


56 r ics.org

To view more jobs online visit ricsrecruit.com

Liverpool Housing Trust (LHT) is a charitable housing association with 10,000 homes in Merseyside and Cheshire.

We are looking to recruit an independent Board member with property-related expertise, who shares our commitment to providing the highest quality housing and neighbourhood services.

The Board meets 10 times a year and has a programme of away days and training events.

The role is voluntary but reasonable expenses will be paid, and training provided.

Board Member vacancy: Liverpool Housing Trust

To apply, or for more information please contact: Audrey Davidson, Group Secretary, Symphony Housing Group, 12 Hanover Street, Liverpool L1 4AATel: 0151 708 2402Email: [email protected]

LHT is part of Symphony Housing Group

lht.co.uk

LHT

Henry Boot Developments requires a Project Manager to ensure the efficient and effective administration of development contracts.

Reporting to a Senior Project Manager, you’ll both assist and take soleresponsibility for meeting costs, programme and quality targets in both a pre-contract and post contract capacity.

You’ll be professionally qualified (RICS or equivalent) with upto 3 years’ post-qualification experience (ideally with experience working as an employer’s agent or developer’s project manager) and be able to sustain our reputation for business integrity and lasting quality developments.

Based at our Head Office in Sheffield, the successful applicant willenjoy a competitive salary, company car/car allowance, stakeholderpension, private health care and profit related bonus.

Please send your CV and covering letter (stating your current remuneration package) to [email protected].

Closing date: 20th April 2012

CONSTRUCTION Professional Services Manager London£35,000 Ref: RICS0045With a background within the construction industry, you are likely to have developed an understanding of working with regulatory bodies. You will be responsible for servicing the management boards of the professional services activities and the BCPSAG secretariat. You will need to possess outstanding organisational abilities to prioritise the demanding workload.

BUILDING SURVEYINGBuilding Surveyor BirminghamAttractive package Ref: RICS0046You will be responsible for the profi table delivery of work, including contract administration, project monitoring, building condition surveys, dilapidations and construction monitoring. As an enthusiastic and motivated individual you will not only have exceptional technical expertise to lead, support and guide staff, but you will be someone who has very strong client-facing skills.

QUANTITY SURVEYING Quantity Surveyor (Oil & Gas projects) US Negotiable Ref: DNC6213Our client seeks a quantity surveyor to provide a site-based quantity surveying function in Houston, Texas, to support the goals of the Contracts and Procurement and Commercial Teams in the administration of the subcontracts through construction to completion and close-out of the contract on a range of oil and gas, and chemicals projects.

BUILDING SURVEYING Building Surveyor/Project Manager WeybridgeCompetitive Ref: Ae446 As a result of continuing growth, a vacancy has arisen for a Building Surveyor/Project Manager. We are interested in applications from client-focused, talented, fl exible individuals with experience of working in progressive design-led practices. You would be involved with projects ranging in size, from small refurbishments through to new-build schools, from project inception to completion and beyond.

QUANTITY SURVEYING Senior and Intermediate QS LondonCompetitive Ref: RICS0044 Due to an expanding workload, we have vacancies for Senior and Intermediate quantity surveyors. Expect to take leadership roles in service delivery to projects and to support senior staff and clients in a range of areas. We will provide a competitive salary package, and a varied, challenging workload within a friendly fast-moving environment.

TO VIEW THESE JOB DESCRIPTIONS in full and to apply online, please visit ricsrecruit.com and enter the reference number in the keyword box.

ricsrecruit.com

MODUS_April_P54-57_Classified.F1.indd 56 20/03/2012 14:50

ricsrecruit.com

Missing an experienced surveyor or graduate?

RICS’ recruitment advertising solutions – Modus, ricsrecruit.com and our specialist journals – offer an unrivalled surveying audience for all your recruitment needs.

RICSRecruit.com• Reaching 30,000 candidates• Covering more surveying specialisms than any other jobs board• Access to RICS members and new up-and-coming talent• Tailor-made recruitment campaigns.

To reach these candidates contact Grace Healy or Dorlisa Purkiss today:+44 (0)20 7871 2667 or [email protected]+44 (0)20 7871 2663 or [email protected]


UK£241,461 (average)

Detached £342,576

Semi-detached £204,993

Terrace£198,065

Flat£229,690

Germany (detached) €238,480* (£198,000)

France (outside Paris) €196,000* (£183,500)

Canada CA$348,178 (£221,000) (Jan 2012)

New Zealand NZ$429,200* (£226,900)

Chicago US$155,100* (£98,000)

San Francisco US$465,900* (£294,400)

Adelaide AUD$400,000** (£272,300)

Miami US$153,600* (£97,000)

Washington DC US$294,800* (£186,300)

Sydney AUD$670,500** (£442,800)

New York US$375,900* (£237,500)

Seattle US$287,100* (£181,400)

Gold Coast AUD$626,460* (£426,500)

Mumbai Rs21.8m* (£280,000)

Hong Kong HK$2.58m** (£210,300)

Jakarta 4-bedroom US$354,600* (£224,100)

Hanoi 4-bedroom US$816,600* (£516,100)

Los Angeles US$292,700* (£185,000)

42% The percentage of the EU-27 population living in flats***(Highest: Latvia 66%)

34% The percentage of the EU-27 population living in detached houses***(Highest: Slovenia 69%)

*2011 average; **2010 average; ***2009 averageSOURCES: The Housing Sector – Household Consumption From a European Perspective RICS Research; bbc.co.uk; coldwellbanker.com; epp.eurostat.ec.europa.eu; globalpropertyguide.com; ricsasia.org; realtor.org; thestar.com

EUROPE

ASIA

AMER

ICAS

OCEANIA

EU HOUSING CONSUMPTION EXPENDITURE (%)

UK

GERMANY

NETHERLANDS

SPAIN

BELGIUM

FRANCE

IRELAND

FINLAND

EU 27

DISTRIBUTION OF POPULATION BY DWELLING TYPE*** (%)

20 40 60 80 100

FLAT DETACHED

SEMI-DETACHED OTHER

2000 2009

5 10 15 20 25 30

HOME OWNERSHIP IN ASIA (%)

SINGAPORETAIPEIKUALA LUMPURSHANGHAIBANGKOK HONG KONG SEOULTOKYO

20 40 60 80 100

58 rics.org

Illustration by Ian Dutnall

Measure//

COST COMPARISON GLOBAL HOUSE PRICES AND HOME OWNERSHIP

MODUS_April_P58_measure.v2.F1.indd 58 20/03/2012 11:23

“ WE CAN’T AFFORD TO TAKE RISKS WHEN WE’RE APPOINTING OUTSIDE CONTRACTORS” Robert Marsh, Director (Electrical),

Johnathan Hart Associates

ECA electrical contractors must undergo a thorough examination of their financial, commercial and technical skills

ONE LESS THING TO WORRY ABOUT.

To find an ECA contractor that’s right for you: www.eca.co.uk

ECA faces 274x202.indd 1 13/01/2012 11:35MODUS_April_P59_ECA_Ad.indd 1 21/03/2012 13:07

I’d like to leave more than just bricks & mortarEver since I became an RICS member I’ve been asked by my peers ‘to maintain and promote the usefulness of the profession for the public advantage’.Now though, having looked after the interests of those our industry serves, and being fortunate enough to have thrived within it, I’d like to give something back by leaving a legacy donation to help support and care for the future of those fellow members less fortunate than myself.

LionHeart Legacies have over the years and thanks to the generosity of hundreds of people who have made a bequest, contributed greatly to the ongoing LionHeart cause. LionHeart appreciates all bequests, large or small. There are three main types of gift: Pecuniary legacy - a cash gift of any size (ie £1,000) Specific bequest - items of value such as property a car or jewellery. And finally a Residuary bequest - balance of your estate after all debts, taxes, expenses and other legacies have been paid.

LionHeart, the registered charity for RICS members and their families, offers a wide range of support and services to help those affected by and dealing with ill-health, disabilities, unemployment and bereavement. From legal advice and financial support to counselling and befriending, we endeavour, with the help of many volunteers, to help make everyday lives a little easier.

Registered Charity No. 261245Company Registered in England No. 980025

for further information on setting up your own LionHeart Legacy, visit us today at lionheart.org.uk or call us on 0845 6039057 Thank you.

for RICS members and their families

Please let us know if you intend to leave us a legacy so we can express our very great appreciation to you.

MODUS_April_P60_Lionheart_Ad.v1.indd 1 21/03/2012 10:19

RICS Modus, Global edition — April 2012

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Transcript of RICS Modus, Global edition — April 2012