What Is Hope Value in Land?

What Is Hope Value in Land?

Hope value is a term used in land valuation to describe the value attached to the possibility that land could achieve a more valuable use in the future.

For example, a parcel of land may currently be used as agricultural land, a paddock, a large garden or commercial land. If there is a realistic possibility that the land could eventually be developed for housing or another higher-value use, a purchaser may place a value on that potential even though planning permission does not currently exist.

This potential additional value is often referred to as hope value.

Hope value is therefore different from the value of land with an existing planning permission. It reflects a possibility rather than a planning consent.

Is Hope Value the Same as Planning Permission?

No. Hope value and planning permission are two different things.

Land with planning permission for a defined development has a different planning status from land where development is only a possibility. A planning permission establishes what has been approved, subject to its conditions and other requirements.

Hope value, by contrast, reflects the possibility that planning permission or another valuable change of use could be achieved in the future.

This distinction is important because the greater the uncertainty surrounding the planning outcome, the greater the risk a purchaser may have to take into account when assessing what the land is worth.

What Creates Hope Value?

Hope value can arise where there is a credible reason to believe that land could have a higher-value use in the future.

Factors that may contribute to this include:

• the site’s location and relationship with an existing settlement;
• local demand for housing or other forms of development;
• the availability of suitable access and infrastructure;
• the site’s planning history;
• planning policy and the direction of the Local Plan;
• nearby development or changing patterns of land use;
• the site’s physical characteristics;
• the presence or absence of significant planning constraints; and
• evidence that similar sites have successfully obtained planning permission.

None of these factors guarantees development. They are indicators that may justify investigating whether the land has potential beyond its existing use.

Does Land Have Hope Value Without Planning Permission?

Yes. Hope value is particularly relevant to land where planning permission has not yet been granted.

A landowner may therefore own land that has a relatively modest value in its existing use but which could be worth substantially more if a realistic development opportunity were established.

However, it is important not to assume that every piece of land close to a settlement has significant hope value. Development potential needs to be supported by evidence rather than simply by the fact that nearby land has been developed.

A purchaser will normally consider the probability of achieving planning permission, the potential development, the costs and risks involved and the time that may be required before the land can be developed.

How Is Hope Value Reflected in Land Value?

There is no standard percentage that can simply be added to the existing value of a piece of land to calculate hope value.

The value will depend on the particular circumstances of the site and the assumptions made by the purchaser.

A purchaser considering land with development potential may look at matters such as:

• what could realistically be developed;
• the potential number and type of units;
• the likely value of the completed development;
• planning and professional costs;
• infrastructure and abnormal development costs;
• affordable housing and other planning obligations;
• finance and timescale;
• the risk of planning refusal or delay; and
• the return required for taking that planning risk.

This is why two sites with the same acreage can have very different values.

What Is the Difference Between Existing Use Value and Hope Value?

Existing use value is broadly concerned with what the land is worth for its current or established use.

Hope value reflects the possibility of achieving a more valuable future use.

For example, agricultural land may have a value based on its agricultural use. If that land has characteristics that suggest it could potentially be suitable for residential development, a purchaser may consider whether there is additional value associated with that possibility.

The difference between the two is not necessarily the full value of the land after planning permission. Hope value sits somewhere within the risk spectrum between the existing use and a successful future development outcome.

Can Hope Value Increase Without Planning Permission?

It can.

Changes in planning policy, new Local Plan proposals, nearby development, improvements to infrastructure or other changes in the planning context can alter how the market views a site’s potential.

For example, land that was previously considered poorly located might become more interesting if a settlement expands towards it or new infrastructure changes its relationship with nearby development.

Equally, hope value can fall if planning policy changes, new constraints are identified or evidence emerges that development is unlikely to be supported.

Hope value is therefore not fixed. It can change as the planning and market circumstances surrounding a site change.

Does Being Next to a Settlement Create Hope Value?

Being next to a settlement can be relevant, but it does not automatically create development value.

A site may have a strong physical relationship with an existing settlement but still face significant constraints such as flood risk, poor access, landscape sensitivity, protected habitats or infrastructure limitations.

Conversely, some sites that appear less obviously connected to a settlement may have planning potential because of specific local circumstances or changes in planning policy.

The important issue is therefore not simply whether land touches a settlement boundary, but whether there is a credible planning case for a different future use.

Our guide to whether land is suitable for development explains some of the wider factors that need to be considered.

Does Hope Value Mean a Developer Should Pay More for My Land?

Potentially, but the amount a developer can pay will depend on the risks and costs associated with unlocking that potential.

A developer is unlikely to value land simply on the assumption that planning permission will definitely be obtained. Instead, the developer will normally consider the potential development outcome alongside the probability of achieving it, the costs involved and the return required for taking the risk.

This is one reason why an initial offer for land with development potential may be very different from the value that could ultimately be achieved following a successful planning process.

It is also why landowners should understand what assumptions sit behind an offer before deciding whether it represents fair value.

Can Hope Value Be Realised Without Selling the Land Immediately?

Yes. A landowner does not necessarily have to sell land immediately simply because it has development potential.

Depending on the circumstances, a landowner may consider options such as obtaining planning permission, entering into a promotion agreement, granting an option or exploring other forms of development agreement.

The appropriate route depends on the site, the landowner’s objectives, the planning prospects and the level of risk the landowner is prepared to take.

For more information about promotion, see our guide to land promotion and whether it could be suitable for your land.

How Can a Landowner Establish Whether Their Land Has Hope Value?

The first step is to understand what evidence exists for the site’s development potential.

This might include:

• the current planning designation;
• the site’s relationship with nearby settlements;
• planning applications and decisions in the surrounding area;
• the current Local Plan and emerging planning policy;
• housing need and housing land supply;
• access and infrastructure;
• environmental and physical constraints; and
• the potential development that the site could realistically accommodate.

Only once these factors have been considered can a realistic view be formed about whether the land has development potential and how that potential might affect its value.

Frequently Asked Questions

What does hope value mean in land?

Hope value is the additional value that may be attached to land because of the possibility of achieving a more valuable future use, such as development, even though the necessary planning permission has not yet been obtained.

Is hope value the same as development value?

No. Hope value reflects the possibility of achieving a higher-value use in the future. Development value generally refers to the value associated with a site once its development potential is more certain, for example through planning permission or an established planning allocation.

Does all land have hope value?

No. Hope value depends on the realistic prospect of achieving a more valuable future use. Land with no credible development or alternative-use potential may have little or no additional hope value above its existing use value.

Does planning permission increase hope value?

Obtaining planning permission can substantially change the planning risk associated with a site and therefore its value. However, the amount by which land value changes depends on the permission, the development proposed, costs, market conditions and other factors.

Can Green Belt land have hope value?

Yes. Green Belt land can have potential future value associated with development or another use, although Green Belt policy creates additional planning constraints. The current NPPF also contains specific policies relating to Grey Belt land, so the individual site’s planning position needs to be assessed carefully.

How do developers assess land with hope value?

Developers may consider the potential development, likely completed values, planning prospects, costs, infrastructure, timescale, risk and the return required for taking that risk. This is why a developer’s offer may differ significantly from the value of land with planning permission.

What Does Hope Value Mean for Landowners?

Hope value is important because the current use of land does not always tell the whole story about what it could be worth.

However, development potential should be based on realistic planning evidence rather than simply an assumption that land could eventually be developed.

If your land appears to have potential for a higher-value use, understanding the planning position before accepting an offer or deciding how to proceed can help you make a more informed decision.