Guidance

Land value estimates for policy appraisal 2019: guidelines for use

Published 18 August 2020

Applies to England

Overview

The land values presented here have been provided specifically for the purpose of policy appraisal and are based on the assumptions set out in this document. In particular they are envisaged to be used in conjunction with the MHCLG Appraisal Guide in accordance with the HMT Green Book.

Users should familiarise themselves with the methodology and assumptions made by the Valuation Office Agency (VOA) set out below. The approach used in the production of these values differs from those used previously in the VOA’s now discontinued Property Market Reports.

Whilst the model adopted by the Valuation Office Agency is designed to provide a consistent approach to valuations across local authorities in England, it should be noted that residual valuations are highly sensitive to small changes in model parameters and inputs. As a result the values of a specific site may vary significantly from the typical residential site value for the local authority that is provided in this publication; where land values for a specific site under appraisal are known these should therefore be used over the typical values presented in this document.

Additionally these values are not indicative of the market value of land, for example they exclude any developer contributions which would be required in order to develop a residential site. Therefore we would expect the market price to be substantially lower than the values in the spreadsheet. Further details are set out in the annex and should be consulted before using these values.

These values were made via desk based surveys of typical sites in 2019, therefore they do not account for any impact on land values arising from COVID-19.

Note on methodology from the Valuation Office Agency

Residential land values

The valuations have been undertaken using a truncated residual valuation model. Essentially, this involves valuing the proposed development (the sale price of the proposed scheme) and deducting the development costs, including allowances for base build cost, developer profit, marketing costs, fees, finance etc., to leave a “residual” for the site value.

As instructed, residential land values have been produced ignoring any planning policy compliant levels of affordable housing and assuming 100% private housing. These are analysed per hectare, per unit and per square metre Gross Internal Area (GIA) (in London also per habitable room).

The figures provided assume no affordable housing provision and are, therefore, hypothetical, as in the majority of local authorities it is likely that such a scheme would not obtain planning consent. The figures on this basis may be significantly higher than could reasonably be obtained for land in the actual market.

• Any liability for the Community Infrastructure Levy (CIL), even where it was planning policy as at 1 April 2019, has been excluded.

• It has been assumed that full planning consent is already in place; that no grants are available and that no major allowances need to be made for other s106/s278 costs.

• The figures provided are appropriate to a single, hypothetical site and should not be taken as appropriate for all sites in the locality.

• In a small number of cases schemes do not produce a positive land value in the Model. A ‘floor value’ of £370,000 (outside London) has been adopted to represent a figure at less than which it is unlikely (although possible in some cases) that 1 hectare of land would be released for residential development.

• This has been taken on a national basis and clearly there will be instances where the figure in a particular locality will differ based on supply and demand, values in the area, potential alternative uses etc. and other factors in that area.

Additionally we have assumed that:

• Each site is 1 hectare in area, of regular shape, with services provided up to the boundary, without contamination or abnormal development costs, not in an underground mining area, with road frontage, without risk of flooding, with planning permission granted and that no grant funding is available.

• The site will have a net developable area equal to 80% of the gross area (excluding London).

• For those local authorities outside London, the hypothetical scheme is for a development of 35, two storey, 2/3/4 bed dwellings with a total floor area of 3,150 square metres.

• For those local authorities in London, the hypothetical scheme varies by local authority area and reflects the type/scale of development expected in that locality. The attached schedules provide details of gross/net floor areas together with number of units and habitable rooms.

These densities are taken as reasonable in the context of this exercise and with a view to a consistent national assumption. However, individual schemes in many localities are likely to differ from this and different densities will impact on values achievable.

Commercial land values

These are provided for hypothetical sites outside of London on two bases:

• Out of town offices – assumed to be in business park type location; 1 hectare site; 3 storey offices; 10,187 sq. metres net (11,984 sq. metres gross).

• City centre offices – edge of the CBD; 0.12 hectares; 4 storey construction; 4,106 sq. metres net (4,831 sq. metres gross).

In London the valuations are on the basis of: 0.12 hectares, Grade A space; 12,077 sq. metres gross – 9,662 sq. metres net (Inner London), 10,266 sq. metres net (Outer London).

• The valuations have been undertaken desk based without inspections of the locality.

• Any liability for the Community Infrastructure Levy (CIL), even where it was planning policy as at 1 April 2019, has been excluded.

• Planning consent is assumed to already be in place.

• These are analysed per hectare and per square metre GIA (with and without common areas).

• Figures are based on typical development areas in the authority.

Industrial land

These are provided for hypothetical sites, assuming:

• A typical urban, brownfield location, with nearby uses likely to include later, modern residential developments.

• All services are assumed available to the edge of the site.

• Use is restricted to industrial/warehouse and full planning consent is in place.

• We have assumed that there are no abnormal site constraints or contamination and/or remediation issues.

Agricultural land

These are provided for hypothetical sites, assuming:

• A typical location within the region.

• Figures exclude and uplift from ‘pony paddock’ market or hope value, as appropriate for a commercial agricultural user.

• We have provided one representative land value per LEP.