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Residual Valuation

This document discusses residual valuation, which is a method for determining the value of a property with development potential. It involves estimating the gross development value of a completed project and subtracting all development costs to determine the amount available to pay for the land. This residual amount represents the maximum a developer could pay for the land while still achieving a specified profit level. The document provides examples of how to calculate development costs and profit for different types of residential, commercial, industrial and institutional projects.

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21 views

Residual Valuation

This document discusses residual valuation, which is a method for determining the value of a property with development potential. It involves estimating the gross development value of a completed project and subtracting all development costs to determine the amount available to pay for the land. This residual amount represents the maximum a developer could pay for the land while still achieving a specified profit level. The document provides examples of how to calculate development costs and profit for different types of residential, commercial, industrial and institutional projects.

Uploaded by

singiniwiz
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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RESIDUAL

VALUATION
M. E Phula (MSIM)
RESIDUAL VALUATION
• Drawing from lessons on Residual Theory of Land Value,
the basis of calculation for a residual valuation is
• Value of completed development-cost of carrying out
the development(including profits) =the amount
available for to pay for the land.
RESIDUAL VALUATION
• ‘A method of determining the value of a property which has potential
for development, redevelopment or refurbishment’ (Parsons et al.
2004: 220).
• Effectively, it combines all three of the valuation approaches (Market,
Income and Cost) as defined in the International Valuation Standards
(International Valuation Standards Council 2013: 7).
RESIDUAL VALUATION
• It is used to calculate the site value where direct market comparable
evidence is not available or as a check of its validity, and also by
developers to ascertain the feasibility of a proposed scheme. That is,
to establish what they can afford to pay for the land, which may
produce a different figure to a market value on a comparable basis, or
what potential profit may be achieved if the land is purchased at a
specified price .
To determine the value of development
property
• Establish what is the best (most valuable) use for the site, subject to
full planning consent being forthcoming.
• Estimate the current open market value for the completed
development for this use.
• Estimate what time lapse will be involved to complete the
development.
• Estimate the total costs of the development.
The basic calculation
• GDV (Gross Development Value)
• Less all the costs of development, including:
• Compensation to existing occupiers;
• Planning and other statutory consents Charges;
• Demolition, site clearance and site preparation;
• Promotion and marketing costs;
• Construction costs;
• Architect, quantity surveyor and other construction professional fees;
• Legal and estate agent fees on site purchase and final letting and/or sale;
• Miscellaneous or contingency costs
CONSTRUCTION COST ESTIMATES (APPROXIMATE)

EFFECTIVE MAY 2022

Residential Development Cost /m2 - Euro Cost /m2 - MK Cost /m2 - US$

High density 245.68 236,625.00 288.84


Medium density 396.63 382,000.00 466.30
Low density 547.70 527,500.00 643.91

Industrial Development

Factory / Warehouse 377.81 363,875.00 444.17

Office / Commercial Development


Single storey 575.99 554,750.00 677.17
Multi storey (Normal) 836.60 805,750.00 983.56
Multi storey (With Cladding) 1,131.08 1,089,374.00 1,329.77
Laboratory (duty free) 668.53 643,875.00 785.96

Health / Hospital Development


Single storey 800.78 771,250.00 941.45
Multi storey 1,096.82 1,056,375.00 1,289.49

Educational / School Development


Primary School 407.53 392,500.00 479.12
Secondary School 515.77 496,750.00 606.37
Technical College 583.39 561,875.00 685.87
University 878.78 846,375.00 1,033.15

Fences Cost /m2 - Euro Cost /m1 - MK Cost /m1 - US$

Wire fences 38.94 37,500.00 45.78


Brick fences 103.96 100,125.00 122.22
Concrete panel fences 173.78 167,375.00 204.31

Cost /m2 - Euro Cost /m2 - MK Cost/m2 - US$

Swimming Pool 953.73 918,562.50 1,121.27

Forecourt 59.83 57,625.00 70.34


(Reinforced concrete, mesh wire and sub base and
laterite base)

Cost /m2 - Euro Cost/Ha - MK Cost /Ha - US$

Cost of Land (Low Density) 311,486.02 300,000,000.00 376,180.64

NOTE:
(1) The above figures are inclusive of External Works and Preliminaries.
(2) Figures are DUTY PAID but excludes 16.5% Surtax.
(3) Figure for Laboratory is DUTY FREE as indicated above.
THANK YOU

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