Week 9. Module 10 PPT 2020 (1).pptx - Module 10...

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Module 10 Hypothetical Development Valuation Dr Sharon Yam, School of Business (based on material from Dr Nelson Chan and Mr. Peter Wills)
PAGE 3 Applications Residential subdivisions Conversion of multiple-occupancy property Commercial, industrial, retail development sites Medium density residential and dual occupancy development
PAGE 4 The Valuation Model Hypothetical Development Equation: V = L + D + F + P + A + S Where: V = Total value L = Land cost D =Development cost F = Finance cost P = Profit and risk A = Acquisition costs S = Selling costs
PAGE 5 Method in Words
PAGE 6 The Hypothetical Development Process From the previous formula: Determine the gross realisation of the whole project. Deduct selling expenses Deduct the profit and risk amount Calculate and deduct the development expenses Calculate and deduct interest on the development expenses, including property taxes.
PAGE 7 Calculate and deduct interest on the land for the whole period of the development. Calculate and deduct acquisition costs based on the residual value or cost of the land. The resulting figure is the estimated land value, or the price that you can afford to pay for the land and maintain your profit margin. (All other expenses and charges remaining as calculated).
PAGE 8 Factors to consider in the process Determining the gross realisation Estimating the lot/unit yield (actual number of lots/units in the development). Calculating the lot/unit prices – from market evidence Determining selling expenses Advertising Selling agent’s commission Legal on selling All fees are negotiable and usually done on a per lot basis.
PAGE 9 Development Costs Usually quoted on a per lot basis. Items to consider include: Water and sewerage headworks Earthworks – drainage and road construction Underground power, gas and phone Surveying fees Planning fees Council fees Engineering design and supervision
PAGE 10 Other costs to consider: Staff wages Administration expenses Infrastructure levies/section 7.11 contributions Parking levy Contingency allowances
Section 7.11 of the Environmental Planning &

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