18 Methods of Valuation · 18.1 Methods of valuation

18.1.6 Development and residual methods: hypothetical layout and hypothetical building

The development (residual) method values land that is ripe for development as what the finished development will sell for, minus everything it costs to get there — including the developer's profit and the time value of money; the residue is the land value.

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Key terms

  • development method
  • developer's method
  • residual method
  • hypothetical layout
  • hypothetical building
  • gross development value
  • GDV
  • net saleable area
  • roads
  • recreational open space 10 per cent
  • amenity space 5 per cent
  • development cost
  • developer's profit
  • deferment
  • half the period of sale
  • half the period of development
  • sensitivity
  • undeveloped land

What this note covers

  1. Core factsFoundation
  2. ExplainedStandard
  3. DeeperAdvanced
  4. Mains writingMains writing
  5. Common trapsFoundation
  6. Quick revisionFoundation

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