Valuation-Residual Method (Quiz) Flashcards
Do the RICS provide any relevant guidance?
Yes
e.g. RICS Guidance Note Valuation of Development Property (1st edition, Oct 2019)
When would you use a Residual Land Valuation (RLV)?
Land or property suitable for re(development)
How else could you value development land?
Comparison with sale price of land for comparable development (usually active market, low density development)
How does a RLV differ from a Development Appraisal (DA)?
RLV output is land land value.
DA output is profit.
What is the basic process of undertaking a RLV?
Gross Development Value (GDV) - Costs - Developer’s Profit = Land Value
What is the basic process of undertaking a DA?
Gross Development Value (GDV) - Costs - Land Value = Developer’s Profit
What does a development appraisal show?
Viability or feasibility of a development - you can adjust for the developer’s specific inputs.
What are some of the key things you should look for when inspecting a development site? (12 marks)
- Extent/developable areas.
- Party wall, boundary and right of light issues.
- Topography.
- Flood risk.
- Geotechnical conditions.
- Previous land uses (including contamination).
- Building sizes, height and efficiency.
- Occupational and other interests (whether actual or implied by law).
- Archaeology.
- Abnormals, e.g. site conditions, access.
- Waste/mineral extraction rights/risks.
- Infrastructure
What else do you need to consider? (5 marks)
- Planning framework.
- Permitted Development rights
- Existing planning use and any consents.
- Special controls, e.g. TPOs, green belt, listed status, conservational area.
- Environmental concerns/biodiversity/ecology.
How can you assess development potential? (6 marks)
- What is the highest alternative land use?
- What could you obtain planning for?
- What type of space is in demand?
- What is the market likely to do over the next few years?
- What can be accommodated on the site?
- Do you need to acquire adjacent land?
What is Gross Development Value (GDV)?
Market Value of the proposed development assessed on the special assumption that the development is complete as at the date of valuation in the market conditions prevailing at that date.
What is the Net Development Value (NDV)?
Reflects transaction costs incurred if the completed development was sold on the date of valuation.
How do you establish GDV?
Generally using the comparable or investment methods.
What do development costs include? (10 marks)
- Build costs (based on GIA)
- Sale agent fee (10% initial rent)
- Build costs (based on NIA)
- Letting fee (10% initial rent)
- Professional fees (c. 10-20%)
- Letting fee (1-2% GDV)
- Professional fees (1% GDV)
- Marketing costs
- Contingency (3-10% construction costs)
- Site preparation
- S106/CIL
- Planning and statutory/ regulatory obligation costs
- Contingency (25%+ construction costs)
- Sale agent fee (1-2% GDV)
- Finance costs
- Build costs (based on GIA)
- Letting fee (10% initial rent)
- Professional fees (c. 10-20%)
- Marketing costs
- Contingency (3-10% construction costs)
- Site preparation
- S106/CIL
- Planning and statutory/ regulatory obligation costs
- Sale agent fee (1-2% GDV)
- Finance costs
Where could you source build costs from? (5 marks)
- QS
- SPONS
- Client
- BCIS
- Contractors
- A vague guess
- QS
- SPONS
- Client
- BCIS
- Contractors