Residual Land Value
Establish what a development site is worth by deducting all costs and required profit from the finished value.
Introduction
Who this is for: Developers, land buyers and investors appraising a site with development potential.
Why it matters: Land value is a residual, not a market price. Two developers can look at the same site and reach very different figures purely because of build cost assumptions and required profit. This calculation is what separates a disciplined bid from an optimistic one.
Typical scenario: A developer is bidding on a brownfield site with consent for 20 units, expected to sell for £250,000 each, and needs to know the maximum they can pay for the land while still making a 20% profit on cost.
- Omitting finance costs entirely, which on a two-year scheme can be a substantial sum.
- Using an optimistic GDV based on peak-market comparables rather than achievable sales values.
- Forgetting Section 106, CIL and abnormals — these routinely turn a viable site unviable.
- Taking profit on cost when the lender or joint venture partner requires profit on GDV, or vice versa.
Inputs
Gross Development Value
units
Build Costs
Planning & Statutory
Finance & Profit
months
Sales & Acquisition
Analysis
A 20-unit scheme at £250,000 per unit gives a GDV of £5,000,000.
After build costs of £3,398,000, finance of £216,623, S106 and sales costs — and allowing 20% profit on cost — the site supports a land payment of approximately £189,713, or £9,486 per unit.
That leaves a developer profit of £833,333, equivalent to 16.7% of GDV.
This analysis provides context, not financial advice. Consult a qualified adviser before making investment decisions.
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Live Results
Residual Land Value
£189,713
Gross Development Value
£5,000,000
Total Development Costs
£4,166,667
Developer Profit
£833,333