If you’re looking to determine the value of your land there are a few different methods you can use.
Land value is typically it’s underlying value plus the value of any potential improvements.
Generally an assessment is carried out which includes two parts, an examination of the land and a survey of the surrounding area. But there are a lot of factors that need to be taken into account when valuing land.
To give you an estimate, an acre of farmland in the UK is valued at between £12,000 and £15,000.
Real estate appraisal
An estate agent will use an appraisal process to try and determine the value of your land. The appraisal process has three common approaches.
Income approach – This is essentially trying to work out what income you will get from the land – your incoming rent. The appraiser will look at the market rent for other comparable properties to get a good idea of the potential income that the property is expected to produce.
Cost approach – This approach is a bit more complex. The appraiser will evaluate how much it would cost to rebuild the property exactly how it is from the foundation to the roof.
This approach has a lot more variables, such as the current price of building materials and labor. The cost of the actual building is important to consider, but it’s not usually enough to know the market value of the property.
Sales comparison approach – This approach is where the appraiser will take a look at the recent sales in the area for comparable properties that have actually sold and adjust the price based on transactions and asset characteristics.
Transactions – How quickly the land can sell – date of transactions, payment methods, etc.
Asset characteristics – Assets and liabilities of the area – size, location, regulations, what’s in the area, etc.
This method assumes a buyer will not pay more for a property than other buyers have. And is the most appropriate to determine the value of your land.
What elements can affect the value of my land?
As mentioned, there are a lot of factors aside from other sales in the area to determine the value of your land.
- Topography – Environmental factors. These might play a hand in what can actually be developed on the land. For instance, if the soil can be built on, a property developer won’t want to buy it. Most buildings will have had a topography report carried out as a first point of call.
- How is the property class? What can it be used for? If it’s classed for commercial use at the end of a residential block, that is a completely different value than if the land at the end of the block is also residential.
- Does your land have road access? If it’s a residential piece of land and it’s on a main road, that might decrease the value, but on the other hand, if it’s commercial, that might add more value.
- What’s around your land? Are there shops, a supermarket, some attractions, good transport links? These are usually a good factor to increase value.
- Neighboring properties – If your neighbours have a ton of extra junk and rubbish lying around it could decrease the value of your land.
- Flood zones – If your land is in an area that is quick to flood, no one will want to build a house on it, which makes your land undesirable. What are the holding costs of the property?
- Annual taxes and association fees – Purchasing vacant land might not be as expensive as buying a house but there can be ‘hidden costs to owning vacant land’ but it’s easy to forget, there are still annual taxes to pay (stamp duty) and potentially property owner’s association fees to consider.
- Demand
Demand in the area
Demand for land in the UK or the specific area you’re in can play a huge factor in your land value. Are there tons of property like it on the market or is this a one-of-a-kind property?
If there are a lot of other properties like yours on the market then you won’t be able to ask more than market value. If you had the choice between two very similar properties and one is considerably more expensive, you’d probably choose the cheaper one.
You can look at what similar properties in the area are listed for, and how long they have been on the market. If similar properties have been on the market for a long time, it means there isn’t a large demand for them, and you may have to ask lower than market price to get it sold quickly. If there aren’t very many properties like yours on the market, then you may be able to ask more than the average market value for your land, especially if it has special features too. However, that may take a specialty buyer and you might have to wait a little longer to reach the list price.
Ultimately, your land is worth what the buyer is willing to pay for it and what you are willing to sell it for.