Development Appraisal Flashcards
What is the difference between a development appraisal and a residual valuation?
A development appraisal is used to determine the profit and/or viability whereas a residual valuation is used to determine land value.
What RICS document guides development valuation?
RICS Valuation of Development Property, 1st edition, October 2019.
What document guides development viability?
Assessing Viability in Planning under the National Planning Policy Framework 2019 for England, 1st edition, March 2021.
What policy relates to development viability?
National Planning Policy Framework 2019
What is the purpose of a development appraisal?
A development appraisal is a tool to financially assess the viability of a development scheme.
Can also be used to assess the profitability of a proposed scheme.
What is GDV?
Gross Development Value
The aggregate market value of the proposed development, assessed on the special assumption that the development is complete on the date of valuation in the market conditions prevailing on that date.
What is a development appraisal?
A calculation or series of calculations to establish the value, viability and profitability of a proposed development.
What is a residual valuation?
The amount remaining once the gross development cost of a project is deducted from its gross development value (GDV) and an appropriate return has been deducted.
What are the steps of a residual valuation?
Gross Development Value minus Total Development Cost (inc. profit) = Land Value.
What components are reflected in the TDC?
Site Preparation
Planning Costs
Building Costs
Professional Fees
Contingency
Marketing
Finance
Profit
What is included in Site Preparation costs?
Demolition, Remediation Works, Landfill Tax, Provision of Services, Site Clearance, Fencing.
What is included in Planning Costs?
Section 106 costs & CIL.
What sources would you establish building costs?
BCIS
SPONS
Information from Clients
Building Surveyor
Quantity Surveyor
Typical Professional Fees?
10%-15% of total construction costs.
Typical contingency fees?
5%-10% of construction costs.
What is included in professional fees?
Architects, consultants, project managers, structural engineers.
Typical marketing costs?
1%-2% of GDV (10% of initial annual rent for letting).
What sources help determine interest rates?
LIBOR
Bank of England
What are the 3 elements for finance?
Site Purchase – (compound straight-line basis)
Total Construction Costs - (S-Curve)
Holding Costs to cover voids - (Compound straight-line basis).
On what costs do we consider the developers profit? GDV or Construction?
15%-20%
Residential – GDV
Commercial - Construction