What factors can affect the value of your land?
Updated: Jul 11, 2022
Whether you're thinking about buying or selling land, it’s important to understand the different factors that might affect the price. Like homes, the value of land (any land used for agricultural purposes, development or private use) can vary depending on factors related to supply and demand.
If you are thinking about selling your land or are wondering how much land is worth, read on to learn more about whether or not land can lose value.
Can land change value?
As with any asset, the price of land will vary over time and for a number of reasons. If you're thinking about selling a piece of land, it's worth noting the current market trends surrounding land. Here are some of the factors that can cause land to lose market value:
Low demand or high supply
As with any asset, the selling price of land can vary hugely due to the market. If demand for land is high, you're more likely to sell your land for a higher price. Likewise, if there is currently a short supply of land in your area, developers or agricultural businesses are more likely to pay more for your asset.
The opposite is also true. If there is a low demand for land in your area, for example, there are not many developers interested in the land you are buying, the price you may be able to sell your land at may be lower than if you were to sell it during a period of high demand. Similarly, if there is a huge supply of land in your area (for example, many people are wanting to sell), this may cause the price of your land to lose value.
Poor agricultural quality
If you're looking to sell your land to a farmer or agricultural company, they will want to know that your land meets their requirements. For example, if they are looking at using your land for crops, they may pay less if it's discovered that your land has a low level of nutrients as a result of poor land management. Although the quality of agricultural land can be improved over time, if your land has not been well-maintained or is in a poor location for agriculture, this may have an impact on its selling price.
As with housing, the market value of your land may fall depending on its location. If you have land that is in a sought-after area, such as in city centres or an agricultural hotspot, your land is likely to be worth a lot of money. However, if the land is situated in an area that faces significant environmental risks, it may result in a lower value. For example, if the area is prone to flooding or any other natural disaster, these factors might make people less interested in buying, which will have a negative effect on the price.
Land does not depreciate
Although the state of the market may have an impact on the price your land will be sold at, it's important to note that land is an asset that does not depreciate over time. Depreciation is an economic term that applies to the reduction in the value of an asset over time, usually as a result of overuse or wear and tear. For example, the value of a house may depreciate over time if it's filled with stains or has been damaged.
Unlike most assets, land is not considered to be an asset that can depreciate. This is because it's a useful asset, and the usefulness of land will not change over time. No matter how much time passes, land will always have a value and it will never depreciate. Because land is essential for every type of human activity from development to farming to housing, it means that it has an unlimited amount of usefulness. This usefulness will not decrease over time because there will always be a need for land.
There is only one exception to this rule and this is depletion. A piece of land may only depreciate in value if it has been depleted of a natural resource. For example, the land of a quarry may be considered to be useless if all of its natural resources have been sourced.
How to value land
If you're thinking about buying or selling land, it's important that you understand the true value of the land before you make any transaction. To do this, make sure you consult with a professional such as a real estate agent. They will be able to provide you with an unbiased opinion about how much the land is worth. Are you looking to sell your land and think it might be suitable for development? Then get in touch with NFC Homes to discuss selling land with a developer.