Hypothetical Development

Methodology

Also called the residual method, the hypothetical development approach values a development site by subtracting from the projected gross realisation every cost a competent developer would incur — construction, professional fees, selling costs, finance and a market-required margin for profit and risk. What is left over is the residual that can be paid for the land.

This module runs a time-phased monthly feasibility rather than a single-line residual: construction and professional fees draw down on an S-curve, sales settle over a defined window, and finance is charged on the actual outstanding (drawn) balance each month — including interest on the land draw itself. The residual is solved by iteration, and the same monthly cash flow yields the project IRR, profit on cost and a price/cost sensitivity grid.

The Insitive module orchestrates the feasibility composition: pulling planning permissions and constraints from the cadastre module, gross realisation from the comparable sales module, costs from your build-rate API, and finance from your debt assumptions. The result is a fully transparent residual land value backed by line-item evidence.

When to use it

• Englobo and infill development sites.
• Heritage-listed sites with adaptive re-use potential.
• Sites with a current DA / planning permit where end-product is well-defined.
• Strata subdivision and townhouse-style development.

Standards & references

• IVS 410 — Development Property (IVS 2025).
• IVS 105 — Valuation Approaches and Methods (residual / feasibility under the market and income approaches).
• API Professional Practice 2021 — Australian Property Institute (adopts IVS).
• AASB 102 — Inventories (developer accounting context).

Plugin interface

Every method is a self-contained module that plugs into the Valuation App. It exposes a typed input/output schema so it can be invoked from a report writer, a workflow, or your own backend.