Tea only The truth in the expression “the earth will always appreciate in value because they are not making more of it” is found in the last 7 words! The finite supply of land doesn’t even come close to guaranteeing that its value will increase over time. Supply is only one factor to consider when estimating the value of a real estate parcel, and it is not as important as other issues when it comes to determining the value of land for development.
The land development valuation process begins with several questions. These questions focus on the most profitable use of the parcel, taking into account the current zoning and other legal restrictions and any physical limitations of the site. Value is tied to the “highest and best use” of a parcel of land, which is the most profitable use that is legally, physically possible, and economically viable. Tea utility (utility) of a plot of land is the key.
Suppose there is only one parcel of vacant land, consisting of 20 acres, that is available in one area. It has an excellent location and the utility lines are on the street. The seller is asking $ 2 million for it. How much is it really worth? You can’t answer that question until you know some additional data, such as what uses and development densities are allowed under zoning, how much of the land area can be developed, and whether utility permits are available. In other words, you need to know how the pack can be used and how much use is possible.
Lower future $$$
Time can work for or against the values of land development. It can bring changes that limit how a parcel can be used or impact its economic or physical viability for development. State, county, and local governments may enact laws that prohibit or suspend development for a specified period of time to allow a condition to be corrected or a change to take effect. These “moratoriums” can last for weeks, months, or even years.
Suppose a 20 acre parcel is in an area that has been exploited with development. Builders have purchased virtually every available sewer permit. The local government imposes a moratorium and stops issuing further sewerage and construction permits until the existing wastewater treatment plant is expanded or a new plant is designed, built, and commissioned. Development could be suspended for years because only properties that have sewer permits can be built. The seller would have a difficult time finding buyers once the moratorium took effect because the builders would not be interested in locking up resources in a property that they would not be able to use for the foreseeable future.
Just because this parcel is the only undeveloped property left in the entire area does not mean it is worth a lot of money now or even 10 years from now. If zoned agricultural, for example, the property is likely to not appreciate appreciably over time without a change that allows for profitable development use. Alternatively, the parcel could contain significant areas of natural resources that could not be disturbed or would increase the cost to the point that no development would be economically viable. Time is not going to magically make these limitations disappear. The value will not increase substantially over time.
Future superior $$$
The 20 acre property could it will be worth a lot of money if you are in an area that has been targeted for growth. A highway through the county could be under construction as a result of years of county and state planning, and the value of this property would increase if it were in the proposed highway corridor. The parcel could be worth a lot five years from now when the local government updated its master plan and decided that properties in this area should be zoned to allow for more intensive development than agriculture. This change would promote plans for housing developments and major commercial and retail facilities (a regional mall, shopping malls, theme parks and office campuses), and public services would be extended or expanded to handle the growth expected to occur in this area. area. There would be a substantial appreciation, not because of the passage of time, but because the highest and best use of the plot had changed dramatically.