Land Value
Land value is the value of a piece of property including both the value of the land itself as well as any improvements that have been made to it. This is not to be confused with site value, which is the reasonable value of the land assuming that there are no leases, mortgages or anything else present that would otherwise change the site's value. Land values increase when demand for land exceeds the supply of available land or if a particular piece of land has intrinsic value greater than neighboring areas (e.g., oil can be found on the land).
Land Value
Definition
Land value refers to the worth of a piece of land, including the value of the land itself and any improvements made to it. This is different from site value, which refers to the reasonable value of the land in the absence of any leases, mortgages, or other factors that could alter its value. Land value increases when the demand for land exceeds the available supply or when a particular piece of land has higher intrinsic value compared to surrounding areas (e.g., land with an oil well).
Origin
The concept of land value dates back to ancient times when land was one of the primary sources of wealth. As society evolved, the uses and valuation methods of land also developed. Economists like David Ricardo and Henry George in the 19th century conducted in-depth studies on land value, proposing theories on land rent and ground rent.
Categories and Characteristics
Land value can be categorized as follows:
- Raw Land Value: The value of land that has not been developed or improved.
- Improved Land Value: The value of land that has been developed or improved, such as through the construction of roads or buildings.
- Market Land Value: The value of land when traded in the market, influenced by supply and demand.
- Intrinsic Land Value: The value derived from the land's natural resources or geographic location, such as mineral resources or a prime location.
Specific Cases
Case 1: A vacant plot in the city center has a high raw land value due to its prime location, making it suitable for commercial development. After a developer improves the land by constructing high-end office buildings and shopping centers, the land value significantly increases.
Case 2: A piece of farmland in a rural area has a low raw land value, but the discovery of abundant underground water resources increases its intrinsic land value. The local government decides to develop the land for agricultural irrigation, thereby raising its value.
Common Questions
Question 1: What is the difference between land value and site value?
Answer: Land value includes the value of the land itself and any improvements, while site value refers to the reasonable value of the land without any leases, mortgages, or other influencing factors.
Question 2: What factors affect land value?
Answer: Land value is influenced by factors such as supply and demand, geographic location, natural resources, and regulatory policies.
