Today real estate investment is one of the most sought after investment decisions for a large population. As compared to equity investments, real estate carries less risk and tends to offer decent and regular ROI for the time period you are holding the property.
However, to get started with real estate investment, one must take several parameters into consideration. Average land value increase per year is one such crucial parameter that you must consider while buying a land.
Land value is an important consideration for both buyers and sellers in the real estate market.
Location, zoning, and market conditions are some of the factors that affect the land’s value.
Here are some factors that increase land value over time, making it a valuable investment. For detailed knowledge, keep reading.
Table of Contents
Limited Resource
The land is a finite tangible asset that is neither created nor destroyed, a characteristic that leads to land value increase over time.
Land with enough resources is usually more valuable than that land without such things. The land can be used for a variety of purposes such as agriculture, mining, logging & much more.
The increase in land value, therefore, depends on the presence of resources and purposes it can be used for.
Zero Development Cost
Again, a major factor that can upgrade the value of the land over time is not having any development costs.
A land with zero development costs makes it more attractive to investors. This further helps increase profit margins and boost market perception. Owing to these, investors can find immediate increase in land value over time for long term gains.
An area or a particular land that is already developed or land that can be developed easily is usually more costly than land that needs a lot of investment to make it useful.
This is because the cost of development could be the biggest part to start the investment for some potential buyers. This can lead to having high-budget land or lead to slow growth in your investment.
Durable
Is land a good investment is a very common question that potential buyers wonder considering the durability of purchasing land.
In simple terms, land investment durability implies the long term resilience and stability that makes it an attractive asset. Some key factors that impact the durability of land are its intrinsic value, resistance to depreciation, inflation against hedge, resistance to depreciation, economic growth, versatility and utility of the land and its potential for passive income. These factors play a pivotal role for land value increase over time.
Land should be durable and it should be that much fertile so that it could bear natural disasters like unforeseen changes. Such durability of land always increases its value over time. Therefore, to ensure ROI with increase in land value, consider researching the quality of the land. This shall help you sell the property later as a suitable plot for further residential or commercial purpose.
For e.g. land near the area that comes under the boundary of earthquakes may be less valuable than durable property.
Restrictions and Limitations
Restrictions, such as laws for allowing construction in a particular area, also negatively affect land value.
Similarly, land that is unrestricted can make it more attractive to potential buyers. Therefore, to earn maximum profit with land value over time, consider conducting a thorough research about the location of your land. Your research must also include real estate purchase policies and regulations that bind the location.
Knowing these beforehand, shall hedge you against major losses from land investment for policy barriers.
Less Property Tax
Finally, land that has the least property tax always reaches the maximum value every time.
This is one of the main reasons that property tax increases the expense of land, and landowners always face difficulties.
Therefore, before buying a land, you must consider researching its property tax. This will help you in the long run to benefit from the land value increase over time. A property with less tax on it will attract better and more prospective buyers than plots with high property tax.
Infrastructure Development
Among the factors that affect land value increase over time, infrastructure development plays an important role.
Urbanization of a location around a plot of land can lead to significant increase in property prices. Urbanization or infrastructure development in an area can include development of metal roads, flyovers, railways or airport infrastructure around your property.
In short, development of any public amenities that can be used for diverse residential or commercial purposes can impact your property’s price in the long run.
Location
The location of your property or its proximity to major cities or important spots like universities, hospitals, airports and railway stations is also important. The closer your purchased property to these prime locations, its price shall rise exponentially. This is simply because of the increase of demand for both commercial and residential properties in such regions.
So, if you own a plot of land in a metropolitan city, the land value increase over time will be more visible than a property in a suburban town or countryside.
So value land buyers who are interested in land investment are less likely to major losses by investing in land at close proximity to prime locations.
Bottom Line
We hope that the aforementioned factors helped you to understand how to increase the value of your land over time. Some circ*mstances, such as supply and demand can also affect the increase in value of land over time.
Additionally, the area or the land that is having very high demand, like from the rapidly growing area may have more value.
Keeping in mind the above factors while buying land, you can choose the best property that will give you a guaranteed return on your investment.
Frequently Asked Questions
Does land gain value over time?
Yes, real estate investors can witness an increase in land value over time owing to several reasons. These are socio economic factors, location, demand, environment factors and infrastructural developments.
Is land a good investment?
Buying land can be considered a good investment due to higher demand as compared to its supply, versatility, and ability to generate passive income. However, whether it is perfect for you or not relies on your financial condition as well.
Does land value keep up with inflation?
Yes, according to past records, investors witness an increase in land value with time. This generally for reasons like increase in demand, and cost of living. Unlike the share market, inflation does not tend to cause major fluctuations in land value. Therefore, owning land as an asset to hedge against inflation losses.
Is it smart to buy land and build later?
The decision to buy land is subjective for every investor. If your finances allows, you can opt for the right loan and purchase a land any time it deals fit. As it is well established, land value increases over time, you can choose to buy land early to benefit from the rise in price and build later when time and finances deem fit.
Is land a long-term investment?
Yes, the fact that land value increases over time, makes it a great option for long-term investment. By investing in land, you are less likely to face major losses while the land can also act as a passive source of income during the course of your ownership.
