How to Value a Plot of Land

4 June 2020 Potton News

Plot valuation is subjective depending on your reasons for self building and what you intend to do with your finished house. What follows are some guidelines, but it’s not an exact science and these measures might need adjusting to your particular circumstances.

Ask an expert

A professional will be able not only to tell you about the likelihood of planning permission, but also whether the home you intend to build will live up to the land value. For example, a small two-bed bungalow on a half-acre plot you might be underestimating the value of that plot.

As annoying as it might seem, land often comes before house. It’s a careful balance between the land and you as an individual to find the best answer that works with the location, without spending more than it’s worth once finished.

Location, location, location

Value is tied to location. In some areas, land will be cheaper than others, so in these places it's advisable not to sink loads of money into an expensive house that you plan to sell because you just won’t make up the cost. If it’s going to be your forever home, though, then this doesn’t matter so much.

Planning consent is also a consideration. A plot with existing consent is arguably more valuable than one without because you already know that the Local Authority has permitted development there.

Paying the right price

The residual valuation method is the simplest way to figure out how much to pay for a plot:
Plot value = end value – development costs – desired equity
End value
You need to understand the end value of what you plan to build before you can start a plot valuation. It’s best to ask a local estate agent for help.
Development costs
These include absolutely everything needed to move your home from idea to completely finished product (design services, build costs, build route, fees, contingencies, specification).
Desired equity
For those building a forever home, this isn’t necessarily a concern. This means you can probably afford to pay more for a plot because this deduction won’t be taken. For others who wish to build to sell, or even just those who probably will move again at some point, the money you make from your house is important.

How to Buy and Value a Plot of Land

Facebook LIVE | 19th May 2020 Catch Up
Finding a suitable plot for a self-build project is one of the hardest steps in any self builder's journey. Luckily, Mark is here to unpick the process for you, advising on what (and what not!) to look for. 

Keep your project moving with Potton!