How we value land
We value land with development potential using the residual method: the sale value of the finished homes, less every cost of building and selling them and a profit margin. Land without development prospects is valued on its current use.
What is land worth?
Land is worth what a buyer can justify paying for its most realistic use. For land with no development prospect, that's its current use value, set by sales of similar land. For land where homes are realistic, it's the residual value: what's left once every cost of building and selling the homes, and a profit, has been deducted.
How the residual method works
We estimate what the finished homes would sell for, based on recent sales nearby. Then we deduct the cost of building them, the roads, drainage and services, the professional fees and surveys, finance, sales costs, any affordable housing or planning contributions, and a profit margin that reflects the risk. The figure left over is what the land is worth to a builder.
An illustrative example
These figures are made up to show the arithmetic. They're not a guide to the value of any real site.
| Sale value of eight new homes | £2,400,000 |
|---|---|
| Less build costs, including roads and drainage | −£1,250,000 |
| Less fees, surveys and planning | −£150,000 |
| Less finance and sales costs | −£170,000 |
| Less planning obligations | −£80,000 |
| Less developer's profit | −£400,000 |
| Residual land value | £350,000 |
Small changes add up. If the council allows seven homes instead of eight, or the access road costs more than expected, the residual can fall sharply. That's why we explain the main assumptions behind our offer.
Hope value and current use value
Where permission isn't yet granted, an outright buyer pays current use value plus some hope value, reflecting the chance of permission. Conditional contracts and options can pay a price closer to full residual value, because the price is only paid once permission is granted.
Why we show our figures
An offer is easier to judge when you can see what it assumes. We set out our main figures in writing so your surveyor or land agent can test them. You're under no obligation to accept.
Find out what we'd pay for your land
Send us the postcode and a rough size. We'll check the title and planning position and come back with a straight answer.