EFFRA Questions Berkeley Homes’ Claims on Costs

At the recent Berkeley Homes webinar, David Gilchrist for Berkeley Homes claimed that the cost of delivering the new Howard of Effingham School has risen by circa 35% since the original planning application was submitted towards the end of 2014. He said that as a result the scheme was no longer viable and that therefore more enabling houses are required. To back-up his claims he quoted the BCIS Regional Tender Price Index for the South East for costs and the Land Registry House Price index for Guildford for revenues. EFFRA has also looked at these indices and has concluded that they do not appear to support Berkeley Homes’ claims. EFFRA contacted Berkeley Homes with the attached Fact Sheet detailing the indices and asked for Berkeley Homes’ comments, but has had no reply.

Government figures show that construction costs across Great Britain increased by 15% from 2015 to the end of 2020. (The Government data do not provide a regional breakdown because it is not deemed accurate enough to satisfy the quality criteria needed for official statistics.) EFFRA has not used the BCIS index as it is a subscription only index. It also appears less appropriate as it looks at increases in tender prices rather than construction costs.

Official figures also show that house prices in the Guildford area have increased by 25% since 2015. Therefore revenues from the project should have increased by substantially more than costs, especially as the construction of the houses represents a much larger proportion of the total costs than the school. This suggests that this should result in an increase in the financial return to be made by Berkeley Homes.

For Berkeley Homes to justify their claim on the financial situation, greater transparency is needed on (a) the costs for building the school in the original planning application in 2014 including the publication of the original Financial Viability Report; (b) a breakdown of the new costs and a detailed explanation of why the figures have changed since 2014; and (c) why this justifies an application for an additional 110 homes.

The Fact Sheet summarising the data on changes to school building costs, house building costs and house prices since 2015 can be seen here.
Berkeley Homes Howard School Development EFFRA Construction Costs House Prices Indices Fact Sheet April 2021

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