Route to Build
Depending on your preferred route to build, it’s possible to reduce the build cost, which means that you may be able to pay more for the plot. Using a turnkey contractor may be the most convenient build route — however, little things such as overheads and profits will increase costs negatively impacting on plot valuation. Self-builders who take either a self-managed route or employ a project manager to work on their behalf will generally enjoy lower build costs, which means they can increase what they can pay for the plot (to make sure they secure it).
There will be a plethora of fees that must be paid to be able to develop the plot. These will range from planning fees to surveys and investigations as well as taxes such as stamp duty and CIL (Community Infrastructure Levy). Allowances also need to be included for site insurance and warranty provision. The self-builder has the advantage when it comes to fees as they are exempt from CIL, which can cost tens of thousands. By not having to include CIL payments within the valuation calculation, self-builders can afford to pay more for a plot than say a builder who cannot claim the same exemption.
Broadly speaking, the cost of building the same home from one plot to another is the same — there are some regional cost differences, but this principle rings true. What changes from plot to plot are what’s known as the site abnormals, which are the costs associated with the specific issues unique to that plot. Examples of abnormals would be excessive foundations or expensive services connections or maybe dealing with on-site demolition or contamination etc.
Valuing a plot is all about figuring out the costs and then deducting these from the end value. Unfortunately, not every cost can be identified and therefore an allowance must be made for unforeseen costs which are known as a contingency. Generally speaking, contingency allowances should range between 5% and 10% of the construction cost depending upon the complexity of the project and the due diligence you have done in understanding and dealing with potential plot problems.
Level of Specification and Individualism
The personalisation of a plot to increase the quality of the finish and functionality of a house can prove to be both a good and bad thing in terms of plot valuation. Always try to think about the impact of individualism and whether the features you crave really do add value or compromise the plot valuation by increasing costs.
This is the profit you expect to make from your efforts in developing the plot. Unfortunately, the level of equity is subjective and while some see this as essential (builders and the like), others aren’t that interested in profitability as the opportunity to build a unique home is sufficient reward for the trouble involved. This means that those who are not concerned with profit will not deduct an allowance and consequently will pay more for the plot driving up its value.
Now we’ve explained the plot valuation process along with some of the finer details, you can now get on with valuing your plot accordingly. Remember, the unwritten rule of valuations is perspective — and different people will have different objectives meaning plot valuation is not an exact science.