How to value development land

Valuing development land is crucial when assessing its potential and maximising its future income. If you are a property developer, investor or landowner, understanding the intricacies of these valuations can help you make informed decisions and avoid costly mistakes. 

This article outlines what you need to know about land appraisals, so your next project gets off on the right foot. Read on to learn more.

Valuing land: How is it done?

A valuation of development land determines its worth. It is typically carried out by an RICS-certified surveyor who factors in the kinds of buildings that could be created, construction costs and the estimated market value of the finished project. In short, it is about determining how profitable a site could be.

This is usually calculated by subtracting development expenses, such as professional fees, from the projected value of the completed project. This method ensures the price reflects the land’s true potential.

Your land appraisal specialist will also consider market trends, comparable sales of similar spaces and constraints like environmental restrictions or legal issues.

When will I need a development land valuation?

Most commonly, you will use this service when you are:

• Purchasing land
• Securing finance and using the land as collateral
• Selling land and want to set a fair asking price
• Establishing its worth for inheritance tax purposes

Understand land appraisal jargon

We understand that some phrases may be confusing during the valuation of development land, especially if you do not work or operate within the industry. Fortunately, we have explained complex phrases in simple terms below.

• Gross development value (GDV) – The estimated market value of a completed development project
• Special assumption – A condition applied during the land appraisal process that may not currently exist but could in the future, such as planning permissions being granted
• Residual land value (RLV) – A tactic used when valuing land, where you subtract development expenses from the GDV
• Gross internal area – The total area within a building. This measurement is used to calculate construction costs and expected income
• Gross acre – The total land area, including roads and green spaces
• Net developable acre – The portion of land available for actual development, excluding spaces dedicated to infrastructure and landscaping

Do I need planning permission to value land?

While valuing land without planning permission is possible, we would advise against it because the evaluation might not reflect its full potential. 

Planning permission can show surveyors and prospective investors the legal approval for specific development types, giving them a clear idea of what can be built on the site, such as residential homes or commercial buildings. This reduces any uncertainty and makes the space more attractive, possibly increasing its asking price.

At Eddisons, we have experts who can help you acquire the necessary planning permissions for a plot you own or are hoping to buy. Please contact us to learn more.

How much does it cost to have land valued?

Every land appraisal is unique, which makes providing a generic figure almost impossible. Factors like your location, the size of the site and the level of detail required can impact the amount you are charged for the service. 

We will be happy to provide a more accurate quote if you want a valuation. Simply call us on 0207 022 2380 or fill in our form to arrange a free consultation with one of our Valuations and Advisory specialists.

How long does it take to value land?

Providing a timeframe to value land can also be difficult. The complexity of the property or area and the surveyor's availability can easily impact how quickly you receive a quote. 

Typically, a smaller, more straightforward site can be done in a few days to a week. However, large, more complicated sites with extensive documentation or environmental considerations could take several weeks or longer.

Get in touch for a free land valuation consultation

With more than 180 years of industry experience, you can trust us to complete the necessary work to the standards you demand. No task is too big or small for our Commercial Property Agency team, so get in touch or fill in the form below and we can advise you on the feasibility of your project. We also have 30 offices nationwide, ensuring you are never too far from an expert. 

Want another reason to choose Eddisons to value your land? We are highly rated, with 100% of reviewers recommending us. To learn more about us, read the rest of our news and insights articles.