GDV stands for Gross Development Value. This is the projected value of a property development once it is completed.
The GDV is an important valuation metric used by investors and property developers. It is central to any financial appraisals of a project and is calculated to give a near accurate figure of what the development project may be worth on the open market in the current economic climate, once the project is completed and the individual plots are available for sale.
How is GDV calculated?
For example if the development has 12 flats that we expect to sell for £125,000 each, then the GDV will be £1,500,000 (12 x £125,000).
Without an accurate GDV an investor or developer cannot make any financial projections and hence the risk factor increases significantly and may ultimately hinder any hopes of investment. The GDV remains pertinent throughout the development project as it highlights the capital and rental value of the properties within the project and therefore shows if a profit is being or will be made.
In order to calculate the GDV, the investor or developer needs to analyse current or recent property transactions on a comparable basis, and subsequently decide on what properties should realistically be sold for. It is then a simple calculation to establish the expected return you should receive.
The GDV is the fundamental basis of any development project and is the one metric that impacts on all other major evaluations within a project.