ABSTRACT
This chapter examines how property development projects are evaluated from a financial profit and risk perspective, hence focusing upon the process of development appraisal and valuation. The investment yield is a measure of risk and return and will reflect the property investor's perception of the future rental growth against the risk of future uncertainty. In general terms the faster the level of rent is expected to grow in the future, the lower the yield an investor is prepared to pay at the outset. The residual in an appraisal model is often the develope's profit and risk allowance which is usually expressed as a percentage of the total development costs or, alternatively, as a percentage of the net development value. An understanding of the complexities of risk is essential for a successful developer. Risk is embedded throughout the property market and is the starting point for every analysis involving property.
