How Much Is Your Land Really Worth for Development?

Key Drivers of Development Land Value

Your land’s value for development is not just about its size or location. Many interdependent factors matter. Here are the main ones:

1. Planning Status & Future Potential
   • Does the site already have planning permission (outline or full)? That dramatically increases value.
   • If not, there may still be “hope value” — i.e., what the land could be worth once you secure planning.
   • Local planning policy plays a big role: things like density rules, permitted uses and how the local plan treats development land can make or break potential.
2. Market Demand & Location
   • Proximity to transport links, schools, shops and employment hubs adds a premium.
   • Housing demand in your area affects what units will sell for, which feeds into the Gross Development Value (GDV).
   • The mix you propose (e.g. houses vs apartments) and how dense development is allowed to be will affect value significantly.
3. Infrastructure, Utilities and Site Constraints
   • Access roads and whether you’ll need to bring in or upgrade infrastructure matter.
   • Utilities: costs to connect water, electricity, drainage, gas can be high.
   • Physical constraints like slope, contamination, or ground stability (abnormal costs) can dramatically impact development feasibility.
4. Policy Obligations & Planning Costs
   • Planning contributions like Section 106 or the Community Infrastructure Levy (CIL) reduce what a developer can pay.
   • Biodiversity Net Gain (BNG) may apply, and its cost needs to be included in appraisals.
   • Risk around planning (e.g., refusal, changes in policy) means developers will discount their valuation accordingly.
5. Profit & Return Expectations
   • Developers will only bid up to a point where they can secure a target return.
   • Their required profit margin (or return on costs) significantly affects how much land value “headroom” there is.
6. Legal & Title Risks
   • Easements, rights of way, restrictive covenants, or title issues can reduce value.
   • These risks are often factored into offers by lowering the bid for land.

The Residual Method: A Realistic Way to Value Development Land

At Howe Land, the method we rely on most for development land is the residual land valuation, this reflects what a developer can actually afford to pay. Here’s how it works, step by step:

1. Estimate the Gross Development Value (GDV)
   • This is what the completed development (houses, flats, etc.) will sell for. You base this on comparable local market values.
2. Subtract All Development Costs
   These include:
   • Construction / build costs
   • External works (roads, drainage, landscaping)
   • Professional fees (architects, engineers, consultants)
   • Financing costs (interest, loan costs)
   • Sales and marketing costs
   • Planning obligations (S106, CIL, BNG)
   • Contingency for unknowns
3. Deduct the Developer’s Profit
   • A developer expects a return. According to RICS and market guidance, this is factored in as a requirement in the valuation.
4. Calculate the Residual Land Value (RLV)
   • Formula (simplified): RLV=GDV−(Total Costs+Developer Profit)
   • This gives you the maximum land price a developer could justify.
5. Run Sensitivity Scenarios
   • Because assumptions (e.g. sales values, cost estimates, planning risk) are uncertain, we run different “what-if” situations. This helps test how the land value shifts if costs go up, GDV falls, or planning contributions change.

Why Residual Valuation Matters for You as a Landowner

• Realistic Pricing: You get a number based on what real developers would pay. Not just a “wish list” price.
• Negotiation Power: Armed with a residual valuation, you can negotiate more confidently with potential buyers.
• Strategic Insight: You’ll understand which parts of your site are most valuable and where the key risks lie (e.g., abnormal costs, policy contributions).
• Optimisation Opportunities: By tweaking layouts, mix, or design, you may significantly increase your GDV or reduce costs, thus improving the final land value.

How Howe Land Helps You Unlock the Full Value of Your Land

At Howe Land, we go far beyond simple valuations. We manage the entire journey from initial assessment through to securing a buyer, making the process as seamless and stress-free as possible for landowners.

Initial Site Assessment
We start by reviewing your land in detail, looking at both its potential and any constraints that may affect development. If we believe the site has genuine promise, we move to the next stage.

Market Research & GDV Analysis
Using our market knowledge and data, we calculate a realistic Gross Development Value (GDV). This helps us understand the true potential of the site once developed.

Offer via Option or Promotion Agreement
Based on the appraisal, we present you with an offer through either an option agreement or a promotion agreement. You are completely free to accept or decline. There is no obligation.

Planning Application Managed for You
If you choose to move forward, we take full control of the planning process. We prepare, submit and manage the entire application on your behalf, handling consultants, reports and council negotiations.

Legal Fees Covered
To make the process easier, we cover your legal fees up to £2,500 + VAT.

Securing a Buyer
Once planning permission is granted, we source a suitable developer to purchase the land at the best possible price.

Payment Before Construction Begins
Importantly, you receive your payment before any digger enters the site, giving you certainty and peace of mind.

Final Take-Home Message

• Your land could be worth far more than its current, undeveloped value, if you understand and unlock its development potential.
• The residual method provides a grounded, market-realistic way to assess that value.
• With a robust valuation and strategy, you can confidently negotiate, partner, or plan and maximise the return from your land.

Want a no-obligation residual valuation for your land?
Contact us today and let’s explore what your site could be worth.