Pros and Cons

Question 1

Lack of Comparables

Answer 1

Development sites vary hugely, and this lack of direct market evidence is problematic for the valuer. The residual method enables a value to be provided without direct access to comparable market evidence.

Question 2

Methodology Interface

Answer 2

There are a large number of variables in a development, which usually make the comparable method unsuitable. Comparable and investment methods may be employed in establishing gross development value.

Question 3

Flexibility

Answer 3

The approach is highly flexible and can accommodate a wide range of possible outcomes to help decide what to bid for land.

Question 4

Inflexibility

Answer 4

The method can be criticised because over a lengthy development period, the timings of cash flow are not accurately taken into account. This can be overcome by using a cash flow approach.