Posted on Thursday, February 24th, 2022 in by Matt Garmony
Our licensed valuers and property valuation consultants often assist clients with development site feasibility analysis to determine what a potential purchaser could afford to pay for a site that has development potential. The property valuer’s feasibility analysis can also determine if a project is economically viable. The valuers analyse and interpret the market sales evidence, review other consultants town planning and engineering cost advice and prepare a Hypothetical analysis or Discounted Cash Flow approach to determine the highest and best use Market Value. This method of analysis, along with the comparable sales method, provides owners or potential purchasers with an accurate, independent, unbiased opinion and a dual approach to the market value of a particular property.
There are many factors that can influence the market value of a property including the zoning and development potential. The Hypothetical Development method provides a check method of valuation analysis to the comparable sales approach and can determine if one site is worth more than a sale down the road, particularly if the analysed property has greater development potential.
Our licensed valuers can provide this development site feasibility analysis and project management advice on built form developments such as residential apartments including over 55’s accommodation as well as land subdivision for englobo land parcels.
CASE STUDY
We recently assessed a 100 hectare rural property situated within an inner rural locality of the Perth Metropolitan Area which had a Local Structure Plan showing Development and Subdivision potential with 500 square metre residential lots.
While the property was in an approved Structure Plan Area, it was located in an inland location and had limited retail and other services surrounding, both of these ‘drive’ buyers to an area. We considered the current highest and best use for the land was more towards a large special rural, 1 hectare sized lot type of subdivision. This product has been developed in similar localities and sold at a greater rate than the other smaller 2,000 square metre sized lots within the area. Being a rural location, this would confirm the market sentiment that buyers seek space and larger lots if they are living in rural areas where there are limited additional facilities.
Along with extensive market and sales research, we completed Hypothetical Development and Cashflow Modelling on both the smaller residential lot subdivision and also on a larger lot, lower yield development scenario. The hypothetical special rural subdivision resulted in less costs, shorter development timeframe and greater profitability, thus a higher residual value.
This analysis showed high density does not always equal high market value.
Project Management & Development Feasibility Advice
Licensed Valuer and Property Consultant, Simon Gill has a wide range of experience in property development including residential land subdivision projects in both metropolitan and the south west region of WA, retail development, industrial and commercial projects. Click here to find out more about our Development Site Feasibility Analysis.
For more information, please contact Matt Garmony, Licensed Valuer or Simon Gill, Licensed Valuer for more information. (Contact Us)