A question I’m often asked is:

How much is land worth without planning permission?

If you’ve watched some of my YouTube videos or attended any of our training, you’ll know that we talk a lot about finding off-market land for property development.

The reality is that when you find land off-market, it’s unlikely to already have planning permission in place.

So, if you’re approaching a landowner directly and looking at a site without planning permission, how do you work out what that land is actually worth — and, more importantly, how much should you pay for it?

Let’s break it down.

First, Understand the Value of Land With Planning Permission

Before looking at land without planning permission, it helps to understand how we value a site that already has full planning permission.

Let’s take a simple example.

Imagine a development site where the completed properties would have a Gross Development Value (GDV) of £1.6 million.

GDV simply means the total value of all the properties on the site once they have been completed and sold.

For example:

4 houses × £400,000 = £1.6 million GDV

From that figure, we first need to account for the developer’s profit.

As a general principle, we would be looking for a build profit of at least 25% of the Gross Development Value.

On a £1.6 million GDV, that would be:

£1,600,000 × 25% = £400,000

Now let’s assume, for the sake of simple numbers, that the total development costs are £1 million.

That gives us:

£1,600,000 GDV – £400,000 developer profit – £1,000,000 development costs = £200,000 land value

In this simplified example, the site would therefore be worth approximately £200,000 with full planning permission in place.

Why Many Sites on the Open Market Don’t Stack Up

Now let’s look at another example using the same £1.6 million GDV.

This time, imagine the development costs are £1.24 million.

We still want to protect our £400,000 developer profit.

That calculation becomes:

£1,600,000 GDV – £400,000 developer profit – £1,240,000 development costs = –£40,000 land value

Clearly, nobody is going to pay you £40,000 to take their land away from them.

The problem is that the landowner may still expect a substantial amount for the site. They could potentially be looking for £450,000 or £500,000.

At that point, the development simply doesn’t stack up.

This is one of the reasons why finding the right land off-market can be so important.

How Do You Value Land Without Planning Permission?

When sourcing land that isn’t on the open market, the first thing you need to establish is its current value.

That is your baseline.

You then need to understand what the land could potentially be worth with full planning permission.

The difference between those two figures represents the potential land uplift.

You’re taking an asset owned by the landowner and using your knowledge, expertise, time and money to potentially increase its value by obtaining planning permission.

That uplift can then be shared between you and the landowner.

However, there is an important factor to consider:

Planning permission is never guaranteed.

No matter how much research you carry out, there is always a risk that planning permission could be refused.

That risk needs to be reflected in the price you are prepared to pay.

Agricultural Land vs Development Land

At one extreme, you have agricultural land.

Depending on where you are in the country, agricultural land might typically be worth somewhere in the region of £5,000 to £15,000 per acre.

However, the land you’re looking for as a developer will often be different.

You may be looking for land located within or around the development envelope — an area where the local authority permits development, subject to the relevant planning requirements.

The land also needs to have the appropriate potential use. For example, if you’re planning residential development, you need to consider whether residential development is achievable on that site.

Because of this development potential, such land can inherently be worth more than ordinary agricultural land.

One Way to Assess Your Risk

Imagine a piece of land without planning permission came up at auction.

You could ask yourself:

If I buy this land and fail to obtain planning permission, could I put it back into the auction and recover most of the money I paid?

Ideally, you want to be in a position where you could potentially recover around 90% of your purchase price.

You might lose some money, but you haven’t committed a huge amount of capital to a piece of land that no longer serves your intended purpose.

That gives you a degree of downside protection.

Another Way to Calculate What You Should Pay

There is another approach we can use.

Start by working out what the land would be worth with full planning permission.

Then consider the cost of obtaining that planning permission and apply a multiple to reflect the risk you are taking.

For example, let’s say:

• Land value with full planning permission: £100,000

• Cost of obtaining planning permission: £10,000

• Risk multiple: 5× planning cost

That gives us:

£10,000 × 5 = £50,000

We then deduct that £50,000 from the £100,000 value of the land with planning permission:

£100,000 – £50,000 = £50,000

On this basis, you might agree to pay the landowner £50,000 if planning permission is achieved.

Now imagine that, in its current state without planning permission, the land might only be worth around £10,000.

You are potentially taking the landowner’s asset from a value of approximately £10,000 to a payment of £50,000.

That represents an uplift of around £40,000 for the landowner.

Why This Can Work for Both Sides

The landowner benefits because they can potentially receive considerably more for their land without having to undertake the planning process themselves.

You benefit because you have allowed enough margin to compensate for the money, expertise and risk involved in obtaining planning permission.

Using the example above, you’ve effectively protected another £40,000 of potential margin.

That margin matters because not every site you pursue will successfully achieve planning permission.

A profitable land uplift on successful projects can therefore help offset the costs associated with sites that don’t make it through planning.

Most importantly, you are protecting the build profit you need from the development itself.

Protect Your Profit Before You Buy

The biggest mistake is assuming that land without planning permission should be valued almost as though planning permission already exists.

You are taking the planning risk.

You are investing the time.

You are paying the professional and planning costs.

And there is no guarantee that planning permission will be granted.

Your offer therefore needs to reflect both the current value of the land and the risk involved in creating that uplift.

If you get those numbers right, you can create a deal that works for the landowner while still protecting the profitability of your development.

Want to Learn More About Finding and Funding Development Sites?

If you’re serious about creating a property development business, we run a four-hour online property development training session.

We cover subjects including:

• How to find off-market land

• How to identify potential development opportunities

• How property development deals can be funded

• What development funders are looking for

• How private investors can potentially help fund developments

The training is free to attend, with a £99 fully refundable deposit, subject to the attendance and participation conditions.

👉 Find out more at: https://propertydevelopmentuk.com/

You can also get a copy of my book, “You, a Property Developer”. I’ll cover the cost of the book; you simply contribute towards postage and packaging.

👉 Get your copy at: https://youapropertydeveloper.com/