Sales value evidence an authority will accept

Sales values in a viability appraisal carry more weight than any other input, because gross development value is the largest number in the model and a small percentage movement in it swamps most cost arguments. Shift the average value per square metre by five per cent on a scheme of 80 flats and the residual land value moves by more than the whole of the professional fee line. That is why an authority's reviewer starts with the values, and why an appraisal whose value evidence is a page of agents' particulars gets dismantled.

What an authority will accept is comparable evidence, analysed, adjusted and dated, with the adjustments shown.

Why the value input decides the conclusion

The Planning Practice Guidance on viability expects assessments to be based on current costs and values, and to be made publicly available. The consequence of publication is that your value evidence will be read by objectors, by the authority's reviewer and, if the scheme goes to appeal, by an inspector who has seen a lot of appraisals.

In a residual appraisal, value feeds through three times. It sets gross development value. It drives the affordable housing transfer value where that is expressed as a proportion of open market value. And it affects finance costs through the sales rate, because the absorption assumption and the value assumption are related.

So treat the value section as the evidence base rather than an input page. The structure that works is set out in our note on viability appraisal submission format, and the value schedule belongs in the appendix with the analysis visible, not in a summary table.

Selecting comparable evidence

The selection criteria have to be stated before the comparables are listed, otherwise the selection looks like it was made to suit the answer. State the geography, the period, the property type and the transaction type you have used, and then say which transactions you excluded and why.

A defensible schedule has these characteristics.

• Completed transactions in preference to asking prices, with reservations and exchanges identified as such.
• A stated radius or named comparable locations, with the reason for the choice, rather than an unexplained mixture of nearby and distant evidence.
• A period short enough to reflect current market conditions, with any transaction older than that indexed and the indexation shown.
• Analysis on a consistent basis, normally pounds per square metre of net internal area for flats, with the areas stated and their source identified.
• Both supportive and unsupportive evidence included. An authority's reviewer will find the transactions you left out.

Price paid data published by HM Land Registry is the starting point because it is complete and it flags new build transactions. It does not give floor areas, so pairing it with the energy performance register or with agents' floor plans is how you get to a rate per square metre. Record which source gave each area, because an area taken from a marketing plan and an area taken from the as-built drawings are different numbers.

The new build premium and how to evidence it

A new build premium exists in most markets and asserting one without evidence is the commonest weakness in a value section. The reviewer's objection is simple: you have compared your proposed flats to new build comparables that already include the premium, and then applied a further uplift.

Three approaches are accepted, in descending order of persuasiveness.

1. Paired analysis within the same location, comparing new build transactions with second-hand transactions of similar size and specification over the same period. Price paid data supports this directly because of its new build flag.
2. Analysis of transactions within an earlier phase of the same site or an adjacent scheme by the same type of developer, which controls for location and specification at once.
3. A premium drawn from published market commentary, which is the weakest and should only support a figure derived from one of the first two.

Where the paired analysis shows a premium at the lower end of expectations, say so. An appraisal that reports an uncomfortable finding is more credible on its other inputs.

Be clear about what the premium is for. It reflects the condition, warranty, running costs and specification of a new unit, so it cannot be applied on top of comparables that are themselves new.

Adjusting for specification and floor level

Adjustment is where a value schedule either earns trust or loses it. Show every adjustment as a separate line with a reason, and resist a single composite adjustment covering several differences at once.

The floor area adjustment is the one that most often needs stating explicitly, because mixing a 45 m² studio into a schedule used to value 85 m² two-bedroom flats will distort the rate. Where the authority's own policy drives the unit sizes, as it does where nationally described space standards apply, the standards affect both cost and value and our note on space standards and accessible housing as appraisal inputs covers the interaction.

Do not adjust for the affordable units by applying an open market rate and a discount without evidence of what a registered provider would actually pay. Where you have a bid, use it and disclose it.

Ground rents and service charges

Capitalised ground rent income used to sit in gross development value on leasehold schemes. For new long residential leases, the Leasehold Reform (Ground Rent) Act 2022 restricts ground rents to a peppercorn, so that income line has gone. An appraisal that still carries it is out of date and the reviewer will strike it out.

Service charge assumptions work in the opposite direction. A high estimated service charge depresses the capital value a purchaser will pay, and schemes with concierge provision, extensive communal landscaping, lifts in low-rise blocks or mechanical ventilation carry higher charges. If your scheme's design implies a high charge, the value evidence should come from comparables with similar charges, or the rate should be adjusted downwards with the reasoning shown.

This is a point authorities' reviewers have become better at testing. Stating the assumed charge per square metre in the appraisal, and showing that the comparables carry something similar, closes it off.

The valuation date and market movement

Give the appraisal a stated valuation date and use values current at that date. Where the application takes a year to determine, the authority may ask for the appraisal to be updated, and the honest answer is that both values and costs will have moved.

Two mechanisms deal with the gap, and they are not interchangeable. An early stage review applies where development has not started within a defined period, and recalculates the obligation on then-current inputs. A late stage review applies after a defined proportion of sales, and captures value growth that has actually been realised.

Resisting a review mechanism altogether is usually a losing position where the appraisal shows a shortfall against policy. Negotiating its trigger, its cap and the definition of surplus is a better use of the same effort.

Reconciling two sets of comparables

When the authority appoints a reviewer, you will get a second value schedule. The productive way through is a joint statement rather than two reports talking past each other.

Produce a single table listing every comparable from both schedules, with four columns: agreed, disputed by the applicant, disputed by the authority, and the adjustment each party applies. Most disputes collapse into two or three real disagreements once that table exists, typically the new build premium, the floor level adjustment and whether one unusually high transaction should be included.

Then quantify the gap. If the difference between the two value schedules changes the affordable housing offer by four units rather than fourteen, the negotiation is about something else and both sides should know that. The process for an authority's review is described in our note on independent review of a viability appraisal.

A Viability Assessment is a report type where councils expect a suitably qualified author, and professional review before submission is strongly advised. Draft the supporting Affordable Housing Statement alongside it, so the offer and the appraisal say the same thing.

This is general guidance, not legal advice. Check the position with your local planning authority or a qualified professional before relying on it.

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