Planning, Development and Land Economics
What the exam tests
This domain tests planning control, development appraisal and land economics. You must link permitted use, development yield and residual land value.
Core rules
- The Town and Country Planning Act 1976 provides for development plans, development orders and planning permission. Planning permission is not building plan approval; both may be needed.
- Check zoning, plot ratio, density, height, setback, parking, conversion and affordable housing conditions. Existing use rights and temporary permission can affect value.
- Land economics uses bid rent, supply and demand, accessibility and highest and best use. Residual appraisal: GDV less construction, fees, finance, marketing, contingencies and developer's profit gives land value.
- Developer's profit is usually expressed as a percentage of GDV or cost; be explicit and avoid double-counting finance.
Worked example
A site has a gross development value of RM20 million. Construction and professional fees are RM12 million; marketing and contingency RM1 million; finance and void allowance RM1 million; developer's profit is 20% of GDV = RM4 million. Residual land value before acquisition costs = RM20m − RM12m − RM1m − RM1m − RM4m = RM2 million. If acquisition costs are 3% of land value, solve L = RM2m − 0.03L, so 1.03L = RM2m, L = RM1.94 million.
Traps
Treating GDV as profit; forgetting infrastructure or affordable housing obligations; using a plot ratio not permitted by the planning approval; and confusing planning permission with title conversion.