There are many factors which will influence and affect land values and these factors may fluctuate from time to time. For anyone who is thinking about land investment it is very important that you know what these factors are and how they may affect land values. You will have an idea of what the land is presently valued and what the potential future value is likely to be.
The keyword here is future and someone who is able to speculate well what the prices of the land will be in future will always be on the gainers side. Here are 6 things that affect land values:
Scarcity
The basic principles here remains the same, that something which is tradable and is available in plenty have lesser value than something which is available in less volume. This factor is very significant and for e.g. we can see that the prices in the prime locations of any city, town or just any region is always higher than prices in the suburbs. This is because the prime locations has much more facilities and amenities which are available and due to which many people want to move over there and set up their business or buy a home there. This increases the demand where as the prices in the suburbs and outskirts are low because land is scarce in the cities and the opportunities are less and lifestyle too is not as good as towns. Here if you are able to buy land that is scarce at a reasonable price you will be able to make a profit for selling later at a higher price.
Arability
There are many land areas which are very fertile and cultivable. Places which are fertile and are cultivable are valued very high than non fertile areas.. If you purchase fertile land, you can easily sell it in the future as arable land is always in demand especially for agriculture. Due to this great demand for arable land the price that can be had is usually good.
Zoning Issues
There are local authorities that will place certain restriction on the kind of development that can be done on the land. Certain areas are zoned for certain kinds of development and amenities. Every land owner must apply for permission from the authorities to do any kind of development on any land. Permission is granted or denied based on zoning laws and other considerations and these all will affect the land price.
Development
The land value is also greatly affected by the kinds of development that takes place on it. If a very successful business is developed on it then you can include it in the overall value of the land. You can also choose to sell off the business while still retaining the property. This can help in earn profit from two sources. Thus, profit is coming from selling the business for a good profit and also a regular fixed income from the use of the land by the new business owner.
Taxes
The land value is also very much dependent on the area it is located in and the taxes that are attached to it. If the land tax is considerably high, then it might be a very god reason for the potential buyer to make another choice. Different states have different tax rates attached to land and depending on the type of land there may be a different tax attached. Also the size of the land will affect the amount of tax paid. Thus the larger the land the more tax will be paid and vice versa. Also the land to be invested in may have tax arrears that must be paid up before any transfer of title can occur.
Security
The safety of the area in which the land as located, is an important factor in determining land value. If the area is one that is crime riddled then the value will be lower. The safer the area the land is located in, the more likely that the land investment can produce positive returns over the long term.
When making a land investment these factors that affect land values are to be seriously considered and steps taken to reduce or eliminate their effects.
Source by Gregory Akerman
