You have probably heard the term unimproved land value a few times now but are not sure what it means or why it is important.
In this article, we are going to explore everything there is to know about unimproved land values and how you can use this to your advantage when purchasing your own property. We will also be talking about retail or site value and comparing the difference between the two.
What is unimproved land value?
Each year, land valuers review land values in selected local government areas around the state. Land value is just one of the many factors used to calculate local government rates as well as state land tax and state land rental.
The land valuations also hold information about the property market, which allows you to monitor the movement in the value of your land.
Land valuations are conducted in accordance with the Land Valuation Act 2010, and are completed on all properties in Queensland that are rate-able. When land gets valued, there are a number of considerations taken into account, which I will outline below.
- Property market Research
- Considering the land zoning under the relevant planning scheme
- Physical attributes for example, city views, slope of the land, size and shape of the block
- Considering recently sold properties in the area
Unimproved land value is simply the valuation of the land with no improvements. Improvements can mean things like, fencing, houses, clearing, leveling or earthworks.
Where can you find the unimproved land value of a property?
The most up to date and current platform to search for a property’s unimproved land value is via the Queensland Government website. Click HERE to start searching today.
Once you have entered the address and selected from the drop-down menu the property details will show along with the current land value amount.
Underneath the land value information, there is also a map on which you can select surrounding properties to see what the land value is for properties close by, and how it compares to your land value.
There may be instances where the neighbouring properties have a superior and inferior land value to the site you are searching and this can be due to the following factors.
- Valuation Methodologies – this is more common if the surrounding property is rural, they use a different methodology to calculate the land value
- Physical Attributes – the neighbouring property could have inferior views, steeper typography or may be a triangle shaped block which restricts access in comparison to a rectangular block
- Constraints of the use of the land – This relates directly to zoning, there may be some restrictions on what the land can be used for or the neighbouring land may be flood impacted or have registered easements.
- Land use – the neighbouring land may be used for a different purpose (residential vs commercial use)
There may be instances where your land is less than neighbouring properties do not be too concerned, as it doesn’t always equate to retail land value when you go to sell. A positive is you will have lower council rates as the rates are calculated based on the unimproved land value.
What is retail land value?
Retail land value is very different to the unimproved land value and affects the sale price of a property. The retail land value is the retail price that buyers are willing to pay for a site in the current market. Retail land value is driven by scarcity, demand and the number of buyers who are active in the current market.
The retail value is what people are prepared to pay to secure that location which is typically more than the unimproved land value.
What is the difference between retail value and unimproved land value?
When talking about the difference between retail land value and unimproved land value there are a few key factors that separate the two. Unimproved land value is simply the land with out taking into consideration the market demand for a site.
For example, a recent sale in Power Street, Wavell heights of a block of land sold for $625,000, the land value for this site is $530,000.
Another example is land sold on Fingal Street in Tarragindi, this site sold for $935,000 whilst the land value sat at $710,000.
The desirability of a block of land drives the price, especially when in areas that have highly desirable school catchment zones, parks, lifestyle precincts, and blocks of land with city or mountain views. Even though unimproved land value takes into consideration city views it cannot accurately determine the real market demand of a site.
It is also common for retail land to sell higher due to being in a ready-to-build stage, unimproved land values do not take into consideration improvements to the land however retail land value will take into consideration any improvements made to the land including earthworks completed, fencing, underground services prep and infill.
How land value should be used when purchasing a property
When it comes to investing in property or buying your home, it is always wise to take the land value into consideration when assessing a site to purchase.
You may find that land values reduce as you move further out of the CBD. This is because the land is more scarce (land banked), often more desirable, and more conveniently located when it is close to the CBD. Therefore the unimproved land value is generally higher.
When you are further away from the CBD, there is a lot of available land, and it is a less convenient location, so the land values are lower.
When assessing sites we look at the land-to-asset ratio. This is calculated as a percentage of the purchase price. We like to understand what percentage of the purchase price is made up of the land component versus what percentage is made up of the house itself.
This is how to work out the land-to-asset ratio: Land value – $475,000 Times by 100 Divided by Purchase price – $620,000 Equals = 76.6% land-to-asset ratio.
This means 76.6% of the purchase price is attributable to the land value.
Property investors often target a higher land value as a percentage of the purchase price. The reason this is so important when investing is that the land appreciates over time and the house depreciates over time.
Sometimes, you may find a much lower land-to-asset ratio, even when close to the CBD. This often occurs when the value of the house is much higher. For example, the house might be a brand new build or the house might be freshly renovated. Obviously, when a property is newly completed, the finishes have not depreciated in value, which is often why some properties have very low land-to-asset ratios.
Now that you understand more about unimproved land values, you can use this tool to help you find where the value lies in each property that you look into.