The appraisal inputs section of a viability assessment
A viability conclusion is only as good as its input schedule. Here is what each input needs by way of evidence, and where reviewing surveyors attack.
A viability assessment produces one number, the residual land value, and that number is almost entirely a function of its inputs. Move gross development value by 3 per cent and the residual moves by far more, because the costs stay where they are. Which is why a reviewing surveyor spends their time on the input schedule and barely glances at the conclusion.
The inputs section of a Viability Assessment should therefore be written to be audited. Every figure sourced, every assumption labelled, every departure from convention explained. An appraisal where the reviewer has to reverse-engineer where a rate came from is an appraisal that gets replaced with the reviewer's own.
Why inputs matter more than the output
National viability guidance expects assessments to be transparent and publicly available, and it expects the inputs to be evidenced rather than asserted. In practice this means the inputs section carries the whole credibility of the document.
Two habits separate a good schedule from a poor one. Each input gets a source and a date, and each input that is a judgement rather than a measurement is flagged as one. Build cost from a published cost index at a stated quarter is a sourced figure. A 7 per cent allowance for abnormals is a judgement, and saying so invites a sensible conversation rather than an argument.
Gross development value and the evidence for it
Gross development value is the sum of the completed values of everything the scheme produces. For housing that means private sales values by unit type, affordable housing transfer values at the agreed tenure split, and any commercial element capitalised at a yield.
The evidence a reviewer expects:
- comparable transaction evidence for completed sales within a defined radius and time period, adjusted for size, specification and position
- new build premium evidence where it is claimed, rather than assumed
- affordable transfer values from a registered provider's offer or from recent comparable transfers, with the tenure mix stated
- for commercial space, headline rent evidence, incentives, void assumptions and the yield applied, with the yield justified
Three recurring weaknesses. Using asking prices rather than achieved prices. Taking an average value per square metre across the whole scheme and applying it to every unit, which flatters or penalises depending on mix. And omitting ground rent, service charge or car parking receipts where they exist.
State the valuation date. A gross development value based on evidence from two years ago is not current, and an authority's reviewer will say so.
Build costs, contingency and abnormals
Build cost is usually taken from a published cost index at a stated location factor and quarter, or from a cost consultant's elemental estimate where the design is advanced enough. Either is acceptable. What is not acceptable is a round figure per square metre with no source.
Set out the build cost in parts:
- Base construction cost for the superstructure, with the index, quarter and location factor named
- External works and site infrastructure, which is a separate line and often understated
- Abnormal costs, each itemised with its own evidence, whether demolition, remediation, piling, retaining structures, diversions or utility reinforcement
- Contingency, with the rate stated and the basis explained
- Compliance costs for policy requirements, including biodiversity net gain, energy standards and fire provisions
Abnormals are where the real disputes happen. An itemised abnormal supported by a quotation or a specialist report is hard to challenge. A single line reading "abnormals, 8 per cent" is an invitation to delete it. Utility reinforcement is a frequent omission that only emerges late, and the evidence for it is covered in the guidance on utilities capacity evidence for a residential scheme.
Contingency conventions sit around 5 per cent for new build on a known site and higher for refurbishment or conversion, where the unknowns are greater. Say which you have used and why rather than borrowing a figure.
Finance, fees and programme assumptions
Professional fees are usually expressed as a percentage of construction cost, and the conventional range in appraisals is roughly 8 to 12 per cent depending on complexity. State the figure and what it covers, because a reviewer will ask whether planning, technical and legal fees are inside or outside it.
Finance is modelled on a drawdown profile over the programme, at a stated rate, with arrangement fees. The programme itself is an input: pre-construction period, construction duration, sales rate and the void before the final unit sells. A 24-month sales programme on a 60-unit scheme produces a very different finance cost from a 12-month one, and the sales rate should be evidenced from local absorption rather than assumed.
Marketing and sales costs, legal fees on disposal, and any letting costs for commercial space all belong in the schedule. So does the levy liability and the cost of section 106 obligations, itemised, since those are the figures the negotiation is actually about.
The return assumption and how it is justified
National guidance indicates that for plan making an assumption of 15 to 20 per cent of gross development value may be considered a suitable return to developers, while noting that a lower figure may be appropriate where risk is lower, for example on build to rent schemes or where there is an agreed purchaser.
Two points follow. The figure is a range, not a right, and the position within it has to be reasoned from the scheme's actual risk profile: site complexity, planning risk already resolved, pre-sales or forward funding, and market depth for the product. And the metric matters. A return expressed on gross development value and one expressed on cost are different numbers, so state which is used.
Affordable housing carries less risk than private sale, and it is common to apply a lower return to the affordable element. A single blended figure across the whole scheme is a position a reviewer will test.
Benchmark land value as a separate input
Benchmark land value belongs in its own section rather than buried in the inputs, because it is the comparator rather than a cost. Guidance derives it from existing use value plus a premium to the landowner, disregarding hope value, and it should reflect the policy requirements the scheme is expected to carry.
Keep the two apart in the document structure. Inputs produce the residual. The benchmark is what the residual is tested against. Mixing them is how appraisals end up circular.
Sensitivity testing that a reviewer accepts
A single-point appraisal is not persuasive. Run sensitivities on the inputs that actually move the answer, and present them as a grid rather than as prose.
The variables worth testing are sales value, build cost, the finance rate and the programme. A table showing residual land value at plus and minus 5 and 10 per cent on value and cost tells the reviewer where the scheme sits relative to the benchmark across a realistic range, and it demonstrates that the conclusion does not depend on one optimistic cell.
Where the appraisal supports a reduced policy package, expect a review mechanism tied to later-stage values. Offering one in the submission is usually better received than having one imposed.
A Viability Assessment drafted on PlanScope sets out the inputs section with the sourcing fields, abnormals schedule and sensitivity structure laid out for a chartered valuation surveyor to complete and sign, and the affordable housing position is carried in the Affordable Housing Statement. PlanScope provides AI-assisted draft reports for planning applications. Reports should be reviewed before submission. We do not guarantee planning approval. For specialist technical reports, qualified professional input may be required.
Frequently asked questions
What return assumption should an appraisal use?
National guidance indicates that for plan making an assumption of 15 to 20 per cent of gross development value may be a suitable return, with lower figures appropriate where risk is reduced, such as build to rent or forward-funded schemes. State whether the return is expressed on value or on cost, and reason the position within the range from the scheme's actual risk.
How should abnormal costs be presented?
Itemised, each with its own evidence. Demolition, remediation, piling, retaining structures, diversions and utility reinforcement should appear as separate lines supported by a quotation or specialist report. A single percentage allowance labelled abnormals is the easiest line for a reviewing surveyor to delete from the appraisal entirely.
What evidence supports gross development value?
Achieved transaction evidence rather than asking prices, within a defined radius and period, adjusted for size, specification and position. Affordable transfer values should come from a registered provider's offer or comparable transfers. For commercial space, give headline rents, incentives, voids and the yield with its justification, and state the valuation date.
Is contingency a fixed percentage?
No. Conventions sit around 5 per cent for new build on a known site and higher for refurbishment or conversion where unknowns are greater. The point is to state the rate used and the reasoning behind it. Borrowing a figure without explanation leaves the reviewer free to substitute their own.
Does the appraisal need sensitivity testing?
Yes. A single-point appraisal is rarely persuasive. Test sales value, build cost, finance rate and programme, and present residual land value across a grid at plus and minus 5 and 10 per cent on value and cost. That shows the conclusion does not rest on one optimistic assumption.
Sources and further reading
This article is general guidance about the planning system in England and, where stated, the rest of the UK. It is not legal or professional advice. Check your local planning authority’s validation requirements and take professional advice for your specific site.