All land and property has what is known as an existing use value – that is, a figure for what it’s worth in its current form. So a farmer might be able to sell a field for, let’s say, £10,000 an acre reflecting its use as arable land.
But suppose that farmer manages to secure planning permission for new housing? Suddenly the value could rise to some £200,000 an acre plus in line with its new status as development land.
Hope value lies between the two and increases as the likelihood of a new alternative use becomes more certain. Suppose that farmer’s field doesn’t have planning permission but happens to be right on the edge of a village. There’s a possibility it could be suitable for housing in the longer term so maybe that £10,000 an acre is more like £25,000. That’s the hope value. If the field becomes allocated in the Local Plan and the prospect of planning permission is ever more promising, the hope value will continue to rise as each planning hurdle is successfully negotiated.
In reality, few transactions take place at hope value as most owners want to sit tight and reap the final rewards. But for those who aren’t in a position to wait, understanding how and why values change over time is essential.