The Development Process Week 5 & 6

The Development Process Week 5 & 6 - Project...

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Project Appraisal and Development Peadar T Davis Development Appraisal
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Objectives To  develop  an  understanding  of  the  basic  principles  of  development  appraisal and its role within the development process To examine the main techniques used for the appraisal of development  sites, in particular the residual method of valuation To  have  an  understanding  on  the  concepts  and  purpose  for  which  a  residual valuation may be undertaken
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Learning Outcomes On satisfactory completion, the student should be able: To understand the objective of valuation for development purposes To calculate the residual value of a development proposal To appraise the viability of development schemes
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Bowcock, P. and Bayfield, N. (2000) Excel for Surveyors, Estate Gazette. Britton,  W.,  Davies,  K.  and  Johnson,  T.  A.  (1989)  Modern  Methods  of  Valuation, Estate Gazette. Byrne,  P.    (1996)  Risk,  Uncertainty  and  Decision-Making  in  Property  Development, (2 nd Reading Lists
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Darlow, C.  (1988) Valuation and Development Appraisal, Estate Gazette. Millington, A. F. (1994) An Introduction to Property Valuation (4 th  Edition),  Estate Gazette. Isaac, D. (1996) Property Development, Appraisal and Finance, Macmillan.  Reading Lists
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The assessment of value and cost are dependent on a number of initial surveys  and investigations. These include planning policy, planning history and the site  itself.  The  method  most  frequently  used  for  appraising  the  viability  of  development  schemes is generally known as the residual valuation.  The  residual  approach  can  vary  from  a  simple  assessment  of  site  value  based  upon a deduction of development costs from the gross development value to a  detailed assessment of the cash flows through a development situation.  Introduction
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There  are  essentially  three  main  purposes  for  which  a  residual  valuation  may  be  undertaken.  To calculate the maximum value of a development site which a developer is  considering trying to acquire; To calculate the expected profit from undertaking development where the site  is already owned by the developer; and  To calculate a cost ceiling for construction where land has been acquired to  ensure where possible that a reasonable profit margin is maintained.  Purpose of Residual Valuation
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Residual  method  of  valuation  is  primarily  used  to  value  property  with  development  or  redevelopment  potential,  either  green  field  sites  or  the  refurbishment of existing buildings.  A simple example should demonstrate the principle involved; A property has a 
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The Development Process Week 5 & 6 - Project...

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