Land value is one of the most important elements to consider when weighing up the pros and cons of buying an apartment or detached house. In a rising market, it’s the land value that increases the most.
While the quality and livability of a property is very important, analysis shows between 70 to 80 per cent of the value of a purchase is wrapped up in land value for detached houses.
In other words, if you’re about to spend $1 million on a house, the ideal value of the land should be around $750,000.
Land value is determined not only by its size but also position. The closer you are to a city, transport and amenities, the more value land holds.
For apartment buyers, the value of the investment is far more reliant on the quality of the building and its position than the land on which it stands.
Smaller apartment blocks of less than 10 units will have a higher component of land value than larger blocks. In large developments, land can represent only one-third of the price of an apartment – a huge difference when compared with detached houses.
It is also not true that land is a finite resource. Parcels are often released for new developments by government and local council.