Development Appraisal Flashcards
What is a development appraisal?
A development appraisal is an assessment of the viability of a development project, analysing costs, values, and risks to determine potential return.
What guidance note from RICS is used for development appraisals?
The RICS guidance note “Valuation of development property” and “Financial viability in planning” are key resources.
What is residual valuation?
Residual valuation calculates the residual land value by subtracting development costs and profit from the Gross Development Value (GDV).
What is Gross Development Value (GDV)?
GDV is the total capital value of a completed development scheme based on current market evidence.
What are typical inputs in a development appraisal?
Inputs include GDV, construction costs, professional fees, finance costs, planning obligations, and developer’s profit.
What is the purpose of a sensitivity analysis in a development appraisal?
It tests the effect of changes in key variables (e.g., GDV, costs) on the viability of the scheme.
What does the term ‘benchmark land value’ mean?
It’s a reference value used in viability assessments, often based on EUV+ (Existing Use Value plus premium).
Describe a time you applied a residual method.
I used a residual method to assess land value for a small residential scheme, inputting known costs and market-based GDV to derive land value.
What were the key assumptions in your development appraisal?
I assumed a 20% developer profit, current market construction rates, and reasonable marketing/disposal costs based on local evidence.
How did you determine construction costs for a project?
I used BCIS data adjusted for local market conditions and scheme-specific factors such as build type and density.
How did you approach uncertainty in development appraisals?
I used scenario testing and sensitivity analysis, and clearly reported assumptions and limitations in my advice.
Have you worked with planning consultants on viability assessments?
Yes, I collaborated to test scheme viability against planning policy and CIL obligations, advising on likely impact on land value.
What professional standards did you follow in your development appraisal work?
I followed RICS Red Book, relevant RICS guidance, and ensured all assumptions, sources, and rationale were transparently recorded.
What is the purpose of developer’s profit in an appraisal?
To reflect risk and reward; it ensures the scheme remains viable for the developer when factoring in cost and market uncertainty.
What does EUV+ stand for and how is it used?
EUV+ stands for Existing Use Value plus premium, commonly used to establish Benchmark Land Value in viability assessments.
What is the impact of CIL on development viability?
CIL adds to development cost and may reduce residual land value, affecting scheme viability if not adequately accounted for.
How is finance cost typically treated in appraisals?
It is usually calculated as an interest rate on negative cash flows over the development period.
Why is phasing relevant in development appraisals?
Phasing affects cash flow, cost distribution, and sales receipts, impacting viability and funding requirements.
What does the term ‘planning gain’ refer to?
Planning gain refers to obligations placed on a developer (e.g., affordable housing, infrastructure contributions) under Section 106 or CIL.
What is the difference between market value and worth in development?
Market value reflects the price in the open market; worth is specific to a particular investor or developer’s assumptions.
