What Is Gross Development Value?
**Gross Development Value (GDV)** is the total market value of a completed development, assuming all units are sold at current market prices. It is the single most important metric in [development finance](/services/development-finance) because it determines how much a lender will advance, what your profit margin looks like, and whether your project is viable.
For a residential development of 6 houses each valued at £400,000, the GDV is £2,400,000. For a mixed-use scheme with 10 flats and 2 commercial units, the GDV is the combined value of all units at completion.
Every development finance application begins and ends with GDV. Get it right, and your project appraisal is credible. Get it wrong, and you risk either undersizing your facility (running out of money mid-build) or overestimating your profit (discovering the market does not support your assumptions).
Why GDV Matters to Lenders
Lenders use GDV to calculate several critical ratios:
Loan-to-GDV (LTGDV)
The **LTGDV ratio** expresses total borrowing as a percentage of GDV. Most senior development finance lenders cap LTGDV at **60-70%**. For example:
- GDV: £3,000,000
- Maximum LTGDV: 65%
- Maximum facility: £1,950,000
This means the developer must contribute the remaining costs (land, build, fees) from their own equity or via [mezzanine finance](/knowledge-hub/mezzanine-finance-guide).
Developer Profit on GDV
Lenders require a minimum **profit margin of 15-20% on GDV** as a buffer against cost overruns and market movements. If GDV is £3,000,000 and total costs (including finance) are £2,700,000, the profit is £300,000 or 10% on GDV - most lenders would consider this insufficient.
Residual Land Value
GDV is also used in **residual land value calculations** to determine the maximum a developer should pay for a site:
**Residual Land Value = GDV - Build Costs - Finance Costs - Professional Fees - Developer Profit**
If this calculation produces a negative number or a figure below the asking price, the project may not be viable.
**Key Takeaway:** GDV is not just a valuation number - it cascades through every aspect of your development appraisal. An accurate GDV underpins your facility size, profit margin, and land purchase decision.
How Lenders Determine GDV
The Independent RICS Valuation
Lenders do not rely on the developer's own GDV estimate. They instruct an **independent RICS-registered valuer** to provide a formal GDV assessment. The valuer will:
- Inspect the site and review the proposed development plans
- Analyse comparable sales evidence from recently completed schemes in the area
- Assess market conditions and demand for the proposed unit types
- Consider the specification - size, finish quality, parking, outdoor space
- Provide individual unit valuations for each proposed dwelling or commercial unit
- Assess the development programme and projected completion date
The valuer produces a detailed report including:
- Current site value (existing use value and/or value with planning permission)
- GDV of the completed scheme
- Individual unit values broken down by type
- Commentary on market conditions, demand, and comparable evidence
- Build cost assessment (often cross-referenced with the developer's QS report)
What Comparable Evidence Do Valuers Use?
Valuers rely heavily on **comparable sales transactions** - recently sold properties that are similar to the proposed development in terms of:
- Location - same street, postcode, or local area
- Property type - houses vs flats, number of bedrooms, style
- Size - gross internal area (GIA) in square feet or metres
- Specification - quality of finish, kitchen, bathrooms, energy rating
- Age - new build commands a premium over older stock in many areas
- Tenure - freehold vs leasehold
The strongest comparable evidence is from **new build sales** within the last 6-12 months, ideally from similar schemes in the same area. Where new build comparables are limited, valuers adjust from second-hand sales, applying a new build premium of typically 10-20%.
Off-Plan Sales and Reservations
If you have secured **off-plan reservations** or exchanged contracts on any units, this provides powerful evidence to support your GDV. Lenders view pre-sales very favourably because they:
- Demonstrate market demand at the projected values
- Provide certainty of exit for those units
- Reduce the lender's exposure to market risk
Some lenders offer improved terms (lower rates or higher LTGDV) where a significant proportion of units are pre-sold.
Factors That Influence GDV
Location
Location is the primary driver of GDV. The same 3-bedroom house built to the same specification could be worth £250,000 in one area and £750,000 in another. Lenders and valuers assess:
- Transport links - proximity to stations, motorways, bus routes
- Schools - Ofsted ratings of local schools significantly affect family home values
- Amenities - shops, restaurants, parks, leisure facilities
- Employment - local employers, commuting distance to major centres
- Character - the general appeal and desirability of the area
- Crime rates - lower crime areas command premium values
Unit Mix and Size
The **unit mix** (number and type of dwellings) directly affects GDV. Key considerations:
- Bedroom count - the premium per additional bedroom varies by area
- House vs flat - houses generally achieve higher values per unit but flats may optimise site density
- Gross internal area (GIA) - larger units command higher values, but value per square foot may decrease with size
- Outdoor space - gardens, balconies, and terraces add value, particularly post-pandemic
- Parking - off-street parking significantly affects values in suburban and rural areas
Specification and Finish Quality
The quality of finishes affects both GDV and build costs. A **higher specification** increases GDV but also increases build costs - the question is whether the additional value exceeds the additional cost.
Key specification decisions that affect GDV:
- Kitchen - brand, appliances, worktop material
- Bathrooms - sanitaryware quality, tiling, fixtures
- Flooring - engineered wood, tiles, carpet quality
- Energy efficiency - EPC rating, heat pumps, solar panels
- Smart home features - integrated technology
Planning and Design
**Architectural design** affects both saleability and value. Well-designed developments that respond to the local context, provide good natural light, and create attractive streetscapes achieve higher values than generic box designs.
Lenders also consider:
- Planning conditions - affordable housing obligations, Section 106 contributions
- Community Infrastructure Levy (CIL) - payable on new development
- Restrictive covenants - any limitations on use or future alterations
**Key Takeaway:** GDV is not fixed by location alone. You can influence it through thoughtful unit mix, appropriate specification, and quality design. However, the additional cost of higher specification must be justified by a commensurate increase in value.
Common GDV Pitfalls
Overoptimistic Comparable Selection
Developers sometimes cherry-pick the highest comparables to inflate GDV. Valuers will see through this and use a balanced range of evidence. An overoptimistic GDV in your appraisal damages your credibility and wastes time if the valuation comes in lower.
Ignoring Market Conditions
GDV should reflect **current market conditions**, not aspirational future values. If the market has softened or is uncertain, valuers will be cautious. Build in realistic assumptions about the market at your projected completion date.
Failing to Account for Unit-by-Unit Variation
Not all units in a scheme are equal. Ground floor flats may be worth less than top floor penthouses. North-facing units may sell for less than south-facing ones. A detached plot on the edge of a site may command a premium over a mid-terrace. Your GDV should reflect these variations.
Overlooking Section 106 and CIL
Planning obligations such as **affordable housing requirements** can significantly reduce the effective GDV. If 20% of units must be sold to a housing association at a discount, this must be reflected in your overall GDV calculation.
Assuming New Build Premium Will Apply
New build properties often sell at a premium over existing stock, but this premium varies by area and is not guaranteed. In areas with significant new build supply, the premium may be minimal.
How to Present GDV in Your Application
When approaching lenders via a [development finance broker](/services/development-finance), presenting a credible GDV case strengthens your application. Include:
Comparable Evidence Pack
Prepare a schedule of **6-10 comparable transactions** including:
- Property address and type
- Sale price and date
- Size (GIA)
- Price per square foot
- Source (Land Registry, Rightmove, agent data)
- Relevance notes (why this property is comparable)
Unit Schedule with Values
Provide a detailed unit schedule showing:
- Unit number and type
- Gross internal area
- Your estimated value per unit
- Price per square foot
- Any adjustments for floor level, aspect, outdoor space
Market Commentary
Include a brief market overview covering:
- Local market trends and transaction volumes
- New build demand and competing schemes
- Buyer demographics and affordability
- Any pre-marketing feedback or off-plan interest
Supporting Documentation
- Agent appraisals from 2-3 local estate agents who have assessed the scheme
- Pre-sale agreements or reservations if available
- Planning committee report showing officer commentary on housing need
**Key Takeaway:** Do the valuer's job for them. A well-prepared comparable evidence pack and unit schedule demonstrates professionalism and gives the valuer confidence in your scheme. This often results in a more supportive valuation.
When GDV Comes in Below Expectations
If the lender's independent valuation produces a GDV lower than your estimate, it affects the entire facility structure:
- Reduced facility size - because LTGDV caps the maximum loan
- Larger equity requirement - the developer must bridge the gap
- Squeezed profit margin - which may fall below the lender's minimum threshold
Options When GDV Is Down-Valued
- Challenge the valuation with additional comparable evidence (your broker can help)
- Increase your equity contribution to maintain the target facility size
- Reduce build costs through value engineering
- Renegotiate the land price if the purchase has not yet completed
- Introduce mezzanine finance to bridge the equity gap
- Reassess the scheme - change the unit mix, specification, or design to improve values
- Approach alternative lenders whose panel valuers may take a different view
GDV for Different Development Types
Residential New Build
The most straightforward GDV assessment. Valuers have abundant comparable evidence from similar new build schemes.
Permitted Development Conversions
GDV for [office-to-residential conversions](/knowledge-hub/permitted-development-finance-conversions) requires careful assessment. Converted flats may sell for less than purpose-built new build, but costs are often lower too. Ceiling heights, window sizes, and communal areas all affect values.
Mixed-Use Schemes
For [mixed-use developments](/knowledge-hub/mixed-use-development-finance), the residential and commercial elements are valued separately using different methodologies. Commercial units are typically valued on a yield basis (rental income capitalised), while residential units use comparable sales evidence.
Heavy Refurbishment
[Heavy refurbishment projects](/knowledge-hub/heavy-refurbishment-finance-guide) require GDV assessment of the completed, refurbished property. Character features, period details, and sympathetic renovation can command significant premiums in the right locations.
Using GDV in Your Development Appraisal
GDV is the starting point for your entire project appraisal. Use our [development finance calculator](/calculators/development) to model how different GDV assumptions affect your project economics.
A thorough sensitivity analysis should test:
- GDV 5% below estimate - is the project still viable?
- GDV 10% below estimate - what is the worst-case profit?
- Build costs 10% above estimate - combined with GDV sensitivity, is there still a margin?
Lenders conduct this same sensitivity analysis, so demonstrating that your project withstands downside scenarios strengthens your application.
Summary
Gross Development Value is the foundation of every development finance application. It determines your facility size, profit margin, and ultimately whether your project proceeds. Understanding how lenders and valuers assess GDV, presenting strong comparable evidence, and building realistic assumptions into your appraisal are essential skills for any property developer.
If you need guidance on structuring your project appraisal or want to discuss GDV assumptions for a specific site, [get in touch with our team](/contact) for expert advice.
*Written by Matt Lenzie, Founder of Commercial Mortgages Broker. Ex-Lloyds Bank & Bank of Scotland.*