Reviewed and updated: 17 October 2026. Original archive publication date retained.
The residual method considers what a completed development could be worth and deducts the costs and required return associated with delivering it. The amount left can inform a view of the land or development property’s value. It is not simply a construction budget.
Build the appraisal
Gross development value is an estimate of the completed scheme’s value. The appraisal then needs appropriate allowances for construction, professional work, finance, disposal and the developer’s return, with timing considered consistently.
RICS distinguishes a residual land valuation from an appraisal designed to test profitability or viability. The intended question should be clear before the calculation is interpreted.
Small changes can matter
An optimistic sales estimate or omitted cost can materially change the residual result. Test assumptions about prices, build costs and the programme rather than presenting one number without its inputs.
Check that the proposed scheme is supported by realistic planning and technical assumptions. A calculation based on a larger scheme is not evidence that permission for that scheme exists.
Comparable land transactions provide another useful check where suitable evidence is available. RICS guidance calls for valuation work to be supported by the relevant professional framework.
Keep the appraisal date, evidence and sensitivity tests together. A residual figure is not a guaranteed purchase price or profit, and a changing market or revised specification may require the calculation to be revisited.