ABSTRACT
This chapter examines how property development projects are evaluated from a financial profit and risk perspective so therefore it focuses on the process of development appraisal and valuation. It considers the importance of market research in the assessment or appraisal of profit and risk. The chapter then examines the influence of uncertainty and how this can be contained in order to reduce the effect on risk. Investment risk/return model commences with the final estimated value of the completed property development based on estimated final market prices. An alternative approach for using a residual valuation is to assess the likely costs of producing a development scheme and by deducting these costs from an estimate of the value of the completed development scheme to arrive at a land purchase price. There are two important variables in establishing a development scheme’s value, namely the ‘rent’ and the ‘investment yield’.
