Development land is any piece of land that is available for the development, or redevelopment, of new offices, houses or factories. A professional valuation of development land is often required for the purposes of obtaining advice on loan security, capital taxes, planning purposes, sale or valuation of options.

There are two main approaches valuers use when determining the value of development land:

  • Comparison method – when the land is compared to the sale price of land for a similar development. This is essentially an objective method, based on an analysis of similar sales.
  • Residual Method – when the value of the completed development is assessed, and the development costs (including the developer’s profit) are subtracted, leaving the underlying value of the land.

When it comes to the valuation of development land for affordable housing however, there are a couple of key differences that can affect costs and revenue. These are:

  • The availability of any government or other subsidies or grant (it should be clearly stated on the valuation where these have been taken into account).
  • The impact of legislated regulations in the affordable housing sector.

The valuation of affordable housing development land can be very complicated and involved, and it requires a high level of expertise.

What Exactly Is Affordable Housing?

The affordable housing market in South Africa is defined as those households earning between R3 500 and R15 000 a month. It caters for people who earn more than the maximum qualifying amount for a government housing subsidy, but not enough to qualify for a traditional housing loan from a bank. In real terms, this accounts for about a third of the entire home loan market.

The affordable housing segment is the largest active property market in the country, comprising the most people and the most properties. It’s growing at a faster rate than the high value market, and, of the six million residential properties registered on the Deeds Registry, 58% fall into the affordable housing category (under R500 000).

It’s interesting to note that owners of properties priced at less than R500 000 tend to have higher levels of equity than other investors. (Equity is the difference between what you have paid off so far, any increase in the value of your property, and how much you still owe). People who buy affordable housing tend to stay in their properties longer than people in other housing sectors, which boosts the equity of their property.

At Property Partnership East Rand, our valuers are all registered ‘Professional Valuers’ without restrictions, meaning we can assist with all types of property valuations throughout South Africa, including Development Land Valuations for Affordable Housing. Contact us today to find out more.