10 The value of an interest in property depends on the use for which it is being valued (e.g. as residences, shops or offices), the physical state of the asset, the duration of the legal interest, and obligations such as rents and repairs, etc.
11 Normally, as noted above, the alternative use with the highest market value should be considered. To assess the highest value reasonably obtainable, the valuer must consider the market demand for that use together with the planning situation.
12 Where the development property has planning consent for a more valuable use, the valuation should reflect the market demand for that use. If the appraiser believes that there is the prospect of planning consent for an even more valuable use than that previously obtained, and that there is a real economic demand for that use, then the appraisal should ignore both the existing use of the building and the existing planning consent. Instead, it should normally reflect the best use and highest value of the site, in the way that the market would do.
13 If there is no planning approval, the potential for obtaining such approval should be estimated, and reflected in the valuation. Alternatively, the value of a property may be depressed by restrictions on development. It should be considered whether or not these can be lifted (and at what cost), and the result of this should be reflected in the valuation. In all cases, the prospect for obtaining a higher planning consent should be considered by the appraiser and his professional property advisor.
14 Valuations based on market prices reflect private, rather than social, costs and benefits. Accordingly, they will not always take into full account the actual or potential amenity value, or environmental impact, of a particular land use. Generally, where there is such an impact (for example along the route of a proposed new road), land should be valued at its market price. Environmental costs or benefits of a change of use that are not captured in the market price should also be included in the reckoning.
15 Where the current use of land is subsidised, it is sometimes necessary to adjust market prices to reflect the impact of the subsidy. In particular, when considering transferring land from agricultural use, it will generally be appropriate to make a downward adjustment to the market price of the land to reflect the capitalised impact of expected future UK and EU subsidies: i.e. the land should be priced net of the impact of such subsidies.
16 As these adjustments reflect avoided future costs to taxpayers, it is the adjusted sum that should be included in the assessment.
17 Assessing the value of buildings in their most profitable use is fairly straightforward where the building can be readily adapted to different user requirements, such as standard office accommodation. However, many public sector buildings (such as prisons and hospitals) may not be so easily adaptable to other purposes.
18 Even if there is no developed market for a particular type of property, there may be relevant market information. Such evidence might come from market transactions from the sale, or lettings of buildings or part of buildings such as in the private hospital sector, letting of accommodation for tribunals, etc. It is desirable to estimate value as close to objective market transactions evidence as possible. However, there are some public sector buildings (such as prisons and defence installations) that may not be easily adaptable to other purposes.
19 If there is no alternative use for the buildings, the property should be valued as the higher of:
❑ The value of the site, cleared of buildings and contamination and ready for redevelopment; or
❑ The value of the site and buildings in its current use.