RICS Guide Definition Viability

Question 1

Assumption

Answer 1

A valuation assumption is a supposition taken to be true, not requiring specific investigation by the valuer.

Question 2

Brownfield land

Answer 2

Land occupied by a permanent structure, including curtilage and associated fixed surface infrastructure.

Question 3

Build-to-rent

Answer 3

Purpose-built housing rented out, often with longer tenancy agreements and professional management.

Question 4

Cash flow

Answer 4

The movement of money (income, receipts, payments) during the development period.

Question 5

Community Infrastructure Levy (CIL)

Answer 5

A charge levied by local authorities to fund infrastructure needed for development.

Question 6

Conservation (of heritage assets)

Answer 6

The process of maintaining and managing change to a heritage asset to sustain its significance.

Question 7

Design code

Answer 7

A set of illustrated requirements providing detailed parameters for site development.

Question 8

Designated heritage asset

Answer 8

A heritage asset designated under relevant legislation, like a listed building or World Heritage Site.

Question 9

Developable

Answer 9

Sites suitable for housing development, with a reasonable prospect of being viably developed.

Question 10

Discounted cash flow/cash flow

Answer 10

Valuation method setting out inflows and outflows of an investment or development.

Question 11

Discount rate

Answer 11

The rate of interest selected to calculate the present value of future costs or benefits.

Question 12

Enabling development

Answer 12

Development that secures the conservation of a heritage asset but may not comply with policy.

Question 13

Environmental impact assessment

Answer 13

A procedure ensuring decisions are made with full knowledge of significant environmental effects.

Question 14

Heritage asset

Answer 14

A building, site, or landscape identified as having heritage significance in planning decisions.

Question 15

Interest rate/finance rate

Answer 15

The rate of finance applied in a development appraisal, representing the cost of borrowing.

Question 16

Internal rate of return (IRR)

Answer 16

The interest rate at which all future cash flows are discounted, resulting in a net present value of zero.

Question 17

Local housing need/housing need

Answer 17

The number of homes needed, calculated using national planning guidance.

Question 18

Local plan

Answer 18

A plan for the future development of a local area, adopted by the local planning authority.

Question 19

Local planning authority (LPA)

Answer 19

The public authority responsible for planning functions in a specific area.

Question 20

Major development

Answer 20

Housing development with 10+ homes, or non-residential development with 1,000m2+ floorspace.

Question 21

Market comparison approach

Answer 21

Valuation method comparing the subject land with similar land transactions.

Question 22

Market risk

Answer 22

The uncertainty due to unknown future changes in the economy or property markets.

Question 23

Market value

Answer 23

The estimated amount an asset should exchange for between a willing buyer and seller.

Question 24

Neighbourhood development order

Answer 24

An order granting planning permission for specific development proposals in a neighbourhood.

Question 25

Neighbourhood plan

Answer 25

A plan prepared by a parish council for a designated neighbourhood area.

Question 26

Net development value (NDV)

Answer 26

Gross development value (GDV) minus assumed seller’s costs.

Question 27

Net present value (NPV)

Answer 27

The sum of discounted values of net cash flows, where the NPV is zero, and the discount rate is the IRR.

Question 28

Optionality

Answer 28

The right to pursue an action, such as developing or selling a property.

Question 29

Previously developed land

Answer 29

See Brownfield land.

Question 30

Property- or project-specific risk

Answer 30

Risk attached to the intrinsic development of a site or property.

Question 31

Projections of values and costs

Answer 31

Projecting values and costs to estimate outcomes in an appraisal.

Question 32

Residual method of valuation

Answer 32

Valuation method deducting development costs and profit from the anticipated proceeds.

Question 33

Residual site value/residual land value

Answer 33

Amount remaining after development costs and profit are deducted from net development value.

Question 34

Risk-adjusted return

Answer 34

The discount rate adjusted to reflect the risk of the development.

Question 35

Sensitivity analysis

Answer 35

Calculations varying one or more variables (e.g., rent, sales values) to show differing results.

Question 36

Simulation

Answer 36

Simulation quantifies valuation variations based on the probability of different input ranges.

Question 37

Site promoters

Answer 37

Stakeholders with interests in securing development in a specific area.

Question 38

Special assumption

Answer 38

A valuation assumption that differs from facts existing at the valuation date.

Question 39

Statement of Community Involvement (SCI)

Answer 39

Document outlining how an LPA will engage with the community in its planning functions.

Question 40

Strategic Environmental Assessment

Answer 40

A formal assessment of the environmental effects of plans likely to have significant impacts.

Question 41

Sunk costs

Answer 41

Costs already spent that reduce the remaining development costs and increase site value.

Question 42

Target return

Answer 42

The required rate of return from a project, considering its risk.

Question 43

Valuation variation

Answer 43

A range of valuation outcomes based on differing input estimates or methodologies.

Question 44

Value engineering

Answer 44

Eliminating unnecessary costs to improve the benefit-cost ratio of a project.

Question 45

Yield

Answer 45

The percentage of rental income in relation to the property value.