Land uplift values – what are they?
- rpwills
- 13 hours ago
- 4 min read
Where land use is changed through the granting of planning permission from agricultural to residential development its value increases. The same applies when land changes use in an urban area. Critics of this uplift usually suggest that it is unearned and therefore should be captured through taxation and used by central or local government to fund local activities.
Summary
Where land use is changed through the granting of planning permission from agricultural to residential development its value increases. The same applies when land changes use in an urban area. Critics of this uplift usually suggest that it is unearned and therefore should be captured through taxation and used by central or local government.
It’s important to determine why land gains value due to a potential change of use. Looking at housing its possible to see why dwellings gain value over time. The multi-causal theory highlights several elements including houses as assets, changes to regulations, and earnings. The total price of a new dwelling will consist of the cost of building and the accumulated value arising from the above. Developers when offering to purchase land will look at similar sites and assess what the price should be based on these factors. If the cost of building a new dwelling is say £150,000 but dwellings in a similar location are valued at £450,000 then the floor will be £600,000 plus a profit margin.
Why does land gain value?
When planning permission is granted for an area of land for dwellings to be built, the value of that land increases. [A similar situation arises when a dwelling changes use from residential to holiday use].
The increase in values cam be explained by reference to the multi-causal theory. This as its name suggests accepts that there are various factors which impact on house prices. The main ones are deregulation of housing finance; the dual role of houses as assets and providing a service; asset prices increasing when interest rates are lower; increases in earnings; the use of dwellings for leisure purposes; investors buying property to obtain a return; and foreign investment. Together these elements have led to rising and higher house values.
What a developer is prepared to pay for land depends on a number of variables – location, perceived costs and end use. “Development land is typically valued using a residual approach with reference to comparable transactions. A developer assesses what new build house price is achievable in that location with reference to prices and sales rates in the second hand market and on nearby comparable new build sites.” [Savills, 2015].
“At first sight, the model’s output suggests that there is substantial room for uplift in land values. However, the model is oversimplified by intention and the reality is more complex and varies by local market. Calculating actual land values has to account for a mix of property use classes; a mix of tenures; site remediation; infrastructure and CIL; affordable housing contributions; and other costs. It will also include forecasts for rates of sale, house prices and construction costs. These will then be balanced against the developer’s required rates of return. This all adds a degree of uncertainty to the calculation”. [Savills, 2015].
If the cost of building a new dwelling is say £150,000 but dwellings in a similar location are valued at £450,000 then the floor will be £600,000 plus any other costs incurred and then a margin for profit.
Details of the value of land for SE and SW England are set out below.
Regional Values for land with planning for housing
South-East England (Home Counties and outside London) Residential Land Values - expect between £1.25M per acre to as much as £3M per acre in the most desirable areas (Surrey, Berkshire, Hertfordshire, Essex and most Home Counties).
South-West Residential Land Values - again this region can vary (Chard in Somerset saw a 100%+ increase in property prices in one year in 2023-24, purely due to second home/tourism demand and this directly affects land values) so could be as little as £300,000 to £400,000 in remote areas but easily towards £3M an acre around high-end parts of Bournemouth/Poole. Across the region expect an average of easily £750,000 to £1.25M per acre in most good value areas such as Bristol and Bath.
Conclusion
Land values reflect what developers see as the accumulated value of housing over time together with the expected value after a property has been built. Such values are an inevitable element of the housing market. Potential development land would only fall in value if demand for housing and other development fell.
Notes
Costs include:
“build costs based on appropriate data, for example that of the Building Cost Information Service;
abnormal costs, including those associated with treatment for contaminated sites or listed buildings, or costs associated with brownfield, phased or complex sites. These costs should be taken into account when defining benchmark land value;
site-specific infrastructure costs, which might include access roads, sustainable drainage systems, green infrastructure, connection to utilities and decentralised energy. These costs should be taken into account when defining benchmark land value;
the total cost of all relevant policy requirements including contributions towards affordable housing and infrastructure, Community Infrastructure Levy charges, biodiversity net gain (as required by Schedule 7A of the Town and Country Planning Act), and any other relevant policies or standards. These costs should be taken into account when defining benchmark land value
general finance costs including those incurred through loans;
professional, project management, sales, marketing and legal costs incorporating organisational overheads associated with the site. Any professional site fees should also be taken into account when defining benchmark land value;
explicit reference to project contingency costs should be included in circumstances where scheme specific assessment is deemed necessary, with a justification for contingency relative to project risk and developers return.”
Ministry of Housing, Communities and Local Government and Department for Levelling Up, Housing and Communities, 2025.
Sources
Landsite, Guide for landowners to UK prices for land, how much is my land worth for housing development ?
Ministry of Housing, Communities and Local Government and Department for Levelling Up, Housing and Communities, (2025), Guidance, Viability.
Savills, (4th June 2015), The Value of land, Housing Market Note.