What Happens to Land Value During the Planning Process?

For a landowner, one of the most important questions is not simply “What is my land worth?” but “How might its value change as the planning position becomes clearer?”

A site can move through several stages, from land in its existing use through development potential, planning promotion, possible allocation and eventually planning permission. At each stage, the level of planning certainty may change — and so can the market’s view of the opportunity.

However, it is important not to assume that every planning step creates an automatic increase in value. A site can also encounter policy objections, technical constraints, abnormal costs or other risks that reduce its attractiveness.

Why can land value change during the planning process?

Development land is valuable because of what can potentially be done with it, but that potential has to be balanced against the costs, risks and uncertainty involved in achieving and delivering development.

Government planning guidance on viability recognises that land value needs to be considered alongside development value, development costs, landowner return and developer return. It also distinguishes between the value of land in its existing use and the additional value that may arise from its development potential.

This means that two apparently similar pieces of land can have very different values if one has a clearer planning route, better access, fewer constraints or stronger development prospects.

Stage 1 — The value of the land in its existing use

The starting point is normally the land’s existing use.

This could include:

• agricultural land
• a paddock or equestrian land
• a large residential garden
• commercial land
• an existing building or developed site
• another lawful existing use.

For planning viability purposes, Government guidance refers to Existing Use Value (EUV). This is the value of the land in its existing use and, importantly, excludes hope value for development.

That does not necessarily mean that a private sale of a particular site will always equal its existing use value. Actual market transactions can reflect a range of circumstances. However, existing use provides an important starting point when considering how development potential may affect land value.

Stage 2 — Development potential and hope value

The next stage is where a landowner begins to believe that the site may have potential for development.

This might be because the land:

• is close to an existing settlement
• adjoins existing development
• has good road access
• is close to services or infrastructure
• is close to a railway station
• may have previously developed land characteristics
• could potentially fall within a planning policy opportunity
• has characteristics that make it attractive for a particular form of development.

At this point there may be hope value — an expectation that the land could obtain a more valuable planning use in the future.

Hope value is not the same as planning permission.

A buyer considering land at this stage is taking planning risk. The price they are prepared to pay will therefore reflect both the potential upside and the uncertainty involved.

For a landowner, this is one reason why an apparently attractive offer is not necessarily the same thing as the site’s eventual development value.

Stage 3 — The land is put forward for development

The planning position can become more credible when a site is formally put forward through an appropriate planning process.

For example, a landowner may submit land through a Call for Sites or another Local Plan process.

However, submitting land does not mean that it has been allocated or that planning permission will follow.

A council may assess a site against matters such as suitability, availability, achievability and development potential. Some sites will progress while others will not.

Consequently, simply submitting land should not be treated as a guaranteed increase in value.

Stage 4 — The site may become a Local Plan allocation

A much more significant planning milestone can occur if land is identified for development through the Local Plan process.

An allocation can provide substantially greater planning certainty than simply having an idea that a site might be suitable for development.

But an allocation is still not necessarily the same as an implementable planning permission.

The precise policy wording, proposed use, number of homes or floorspace, infrastructure requirements and other site-specific matters remain important.

The value of allocated land therefore depends on what has actually been allocated and whether the site can realistically progress towards delivery.

Stage 5 — A planning application is submitted

The next major stage may be a planning application.

At this point the proposed development becomes much more specific.

The planning process may address matters such as:

• the number and type of proposed homes or other uses
• site layout
• access
• highways
• drainage
• landscape
• ecology
• heritage
• infrastructure
• affordable housing and other policy requirements.

This can provide a buyer with considerably more information about what the site may actually deliver.

However, the application stage also exposes risks that may previously have been uncertain.

A technical survey might identify an abnormal cost. Highways requirements might affect the layout. Drainage constraints might reduce the developable area. Ecological requirements might affect the scheme.

In other words, more planning information can increase certainty while simultaneously revealing costs or constraints that affect value.

Stage 6 — Planning permission is granted

Planning permission can represent a major reduction in planning risk.

But the value of land with planning permission still depends on exactly what has been permitted and whether the permission is commercially deliverable.

Important questions can include:

• How many units or what amount of development is permitted?
• What type of development has been approved?
• Are there significant planning conditions?
• Are there infrastructure or Section 106 obligations?
• Are there abnormal site costs?
• Can the permission actually be implemented?
• Is there a viable market for the completed development?
• How much would it cost to deliver the scheme?

This is why “land with planning permission” is not a single value category.

A consent for a small number of dwellings on a constrained site can have a very different value from a consent for a larger, straightforward scheme in a strong market.

Stage 7 — The land becomes more development-ready

The planning process does not necessarily end the moment permission is granted.

Further work may still be required before development can proceed, depending on the permission and the site.

Conditions may need to be discharged. Legal agreements may need to be completed. Infrastructure may need to be arranged and development costs confirmed.

The closer a site gets to being genuinely deliverable, the more accurately a purchaser may be able to assess its development potential.

That can be important when comparing offers from developers or considering whether to sell immediately or continue progressing the site.

Does land automatically increase in value at every planning stage?

No.

This is one of the most important points for landowners to understand.

Planning progress can increase the potential value of land, but it can also reveal problems that reduce the amount a developer is prepared to pay.

For example, imagine a site that initially appears capable of supporting 20 houses.

Further investigation might establish that:

• only 15 units are realistically achievable
• access requires significant highway improvements
• drainage infrastructure is expensive
• ecological mitigation is required
• the developable area is smaller than expected
• affordable housing or other policy requirements affect the scheme.

The planning process has increased certainty — but that additional information may not increase the land’s value in the way the landowner originally expected.

What can reduce the value of development land?

A developer will generally look at the entire development proposition rather than simply the headline number of houses that might be possible.

Factors that can affect the value include:

• planning risk
• site constraints
• abnormal construction costs
• highways and access requirements
• drainage and flood risk
• ecological constraints
• infrastructure requirements
• affordable housing requirements
• Section 106 obligations
• Community Infrastructure Levy where applicable
• professional and planning costs
• finance costs
• developer profit requirements
• local property values
• market demand
• the time required to deliver the development.

Government viability guidance specifically states that development viability considers the value generated by development against its costs, including land value, landowner premium and developer return.

How do developers work out what they can pay for land?

A developer is not simply asking:

“How much is an acre of land worth?”

Instead, the developer is likely to consider what the completed development could be worth and then work backwards.

A simplified development appraisal can be thought of as:

This is only a simplified explanation. Real development appraisals contain many assumptions and variables.

Homes England describes residual land value as the amount a developer can afford to pay for land after allowing for the development value, costs and profit needed for the project to remain viable.

This is why a landowner’s expectations and a developer’s appraisal can sometimes be very different.

Why planning certainty matters to land value

As planning risk reduces, a purchaser may have more confidence about what can actually be delivered.

Consider the difference between:

• land where development is only an idea
• land identified as having potential
• land submitted through a planning process
• land identified for development through a Local Plan
• land with an active planning application
• land with planning permission
• land with a deliverable consent ready for implementation.

These are not interchangeable categories.

The market may attach different values to each because the amount of planning risk, time and uncertainty remaining is different.

What happens to land value during land promotion?

Land promotion is designed to progress a site’s planning prospects rather than simply sell the land immediately.

A promoter may work to establish the site’s development potential, engage with the planning system, support technical work and seek to secure an appropriate planning outcome.

If the planning position improves, the land may become more attractive to developers.

However, promotion also involves time, costs and risk. There is no guarantee that the planning strategy will succeed.

This is why land promotion should be considered as a strategy rather than simply a mechanism for automatically increasing land value.

You can read more about the decision between selling now and promoting land in our guide:

Is Land Promotion Better Than Selling Land Now?

Can planning permission dramatically increase land value?

It can, but there is no universal percentage or fixed multiplier that applies to every site.

The difference between existing-use land value and development land value can be substantial where a valuable development opportunity is created.

But the uplift has to be considered against the costs and risks involved in achieving and delivering the development.

A site with planning permission for a commercially attractive scheme may be significantly more valuable than the same site without permission.

Conversely, a permission involving substantial abnormal costs, infrastructure requirements or weak market demand may produce a much smaller uplift than a landowner expects.

Why you should be cautious about online land-value percentages

Landowners will often see claims that development land is worth a particular multiple of agricultural value or that planning permission automatically increases value by a particular percentage.

These figures should be treated with considerable caution.

Land values vary enormously depending on location, planning policy, development type, site constraints, market conditions and the amount of development that can realistically be delivered.

Even two sites next to each other can have different values if their access, ownership, constraints or planning circumstances differ.

A site-specific assessment is therefore much more useful than applying a generic percentage to an existing land value.

What should a landowner consider before assuming the value has increased?

Before treating planning progress as an increase in land value, consider:

• What exactly has changed?
• Has the site’s planning status actually changed?
• Has the potential development been tested?
• What number of units or amount of floorspace is realistically achievable?
• What constraints have been identified?
• What infrastructure is required?
• What abnormal costs might exist?
• What planning obligations may apply?
• What is the local market for the completed development?
• How much planning risk remains?
• How long could the remaining process take?
• Would a developer actually be able to deliver the scheme?

What does this mean if you are considering selling your land?

If a developer has approached you, it can be tempting to compare the offer with the value of the land in its existing use.

That may not tell the whole story.

The more useful question is often:

“What development opportunity does the land realistically have, and what is the value of that opportunity after allowing for the costs, risks and time required to achieve it?”

This is particularly important where a developer is asking you to enter into an option, conditional contract or other arrangement that gives them time to pursue planning.

You should understand what planning risk is being taken, what happens if planning is achieved and how the consideration you receive relates to the potential development value.

Our guide How to Negotiate With a Property Developer Over Your Land explains some of the issues landowners should consider when negotiating with developers.

Could your land have development potential?

If you own land that you believe could have development potential, the first step is not necessarily to assume what it is worth.

The more useful starting point is to understand:

• what planning policies apply
• what development might realistically be appropriate
• what constraints affect the site
• what planning route may be available
• what level of risk remains
• and whether the potential development is commercially realistic.

At Revive Estates Group, we assess land from a development and planning perspective before considering how it might be brought forward.

Land value during planning: the key takeaway

Land value can change as the planning position develops, but there is no automatic value increase at every stage.

The important issue is the relationship between planning certainty, development potential, costs, risk and market demand.

Land with a realistic and deliverable planning opportunity may be worth substantially more than land restricted to its existing use. But the value of that opportunity depends on what can actually be achieved and what it will cost to achieve it.

For landowners, understanding this distinction can help when deciding whether to sell now, seek planning, promote the land or negotiate with a developer.

Frequently Asked Questions

Does land increase in value when planning permission is submitted?

Not automatically. A planning application can reduce uncertainty by defining a proposed development, but the application may also reveal constraints, costs or planning risks. The value depends on the quality and deliverability of the proposed scheme.

Does planning permission always increase land value?

No. Planning permission can increase the potential value of land, but the effect depends on what has been permitted, development costs, planning obligations, abnormal costs, market demand and the commercial viability of the scheme.

What is hope value in land?

Hope value is the additional value that may be attributed to land because of the possibility of a more valuable future use, such as development. It is different from having planning permission and remains subject to planning and other risks.

What is existing use value?

Existing Use Value, or EUV, is the value of land in its existing use. Government viability guidance states that existing use value should disregard hope value when used as the starting point for benchmark land value.

Can a Local Plan allocation increase land value?

A Local Plan allocation can provide greater planning certainty and may make land more attractive for development, but an allocation is not the same as planning permission. The value still depends on the allocation, site constraints, development potential, costs and market conditions.

Is land with planning permission always worth more than land without it?

Not necessarily in a simple or predictable way. Planning permission can materially reduce planning risk, but the value of the permission depends on the development approved and whether the scheme is commercially deliverable.

How do developers calculate what they can pay for land?

Developers commonly use development appraisals to assess the value generated by a proposed scheme and the costs of delivering it. A residual approach can then be used to estimate the amount that may be available for the land while maintaining a viable development.

Should I sell my land before planning permission or promote it first?

There is no universal answer. It depends on the site’s planning prospects, your objectives, risk appetite, timescale and the terms available from a purchaser or promoter. A landowner should understand the potential development opportunity before deciding.

Can Revive Estates Group assess my land?

Yes. Revive Estates Group can assess land to help establish whether it may have development potential and what planning considerations may need to be explored.