Glossary
Residual land value: RLV
What a developer can pay for land: value of the finished scheme less every cost and its profit.
What it means
Residual land value works backwards from the finished development. Start with the gross development value, take off build costs, fees, finance, CIL, Section 106 and the developer's profit, and what is left is the most a developer can pay for the land. It is how housebuilders price sites, so it is the figure a land promoter or option holder is really selling at.
Worked example
ExampleTwelve homes selling for £295,000 each, built for £165,000 each, with a 20% developer margin.
- GDV
- £3,540,000
- Build costs
- − £1,980,000
- Developer margin at 20%
- − £708,000
- CIL and Section 106
- − £108,000
- Residual land value
- £744,000
Small changes to GDV or build cost swing the land value a lot, because it is what's left over.
Information, not advice. Example figures are fictional and for illustration only.