What Makes One Piece of Land Worth More Than Another?

If you own land, it can be difficult to understand why apparently similar pieces of land can have very different values.

Two fields might look almost identical. They may be the same size, sit next to each other and even have similar access. Yet one could be worth substantially more than the other.

The reason is that land value is not determined by acreage alone.

The potential uses of the land, planning circumstances, location, access, constraints and demand can all affect what a purchaser may be prepared to pay.

This is particularly important where land may have development potential.

Land Is Worth What It Can Realistically Be Used For

One of the simplest ways to understand land value is to consider the potential use of the site.

Land used for agriculture, for example, may have a very different value from land that has realistic potential for residential, commercial or other development.

But simply suggesting that land could be developed does not automatically give it a development value.

The potential use needs to be realistic and capable of being supported by the planning, physical and economic circumstances of the site.

This is why the question is not simply:

It is also:

Location Can Have a Major Effect on Land Value

Location is one of the most important factors affecting the potential value of land.

This is not simply about whether a site is in a particular county or region. The characteristics of the immediate location can be just as important.

Factors may include:

• proximity to existing settlements;
• access to local services and facilities;
• transport connections;
• local employment and economic activity;
• the character of the surrounding area;
• local property values; and
• the level of demand for development in the area.

A site in a location where there is strong demand for new homes or commercial space may have very different development potential from an otherwise similar site where demand is weaker.

Planning Can Change the Potential of Land

The planning position is another major factor in determining what land may be worth.

There is an important difference between land that already benefits from planning permission, land allocated or identified for potential development, land where a planning opportunity may exist, and land with no realistic prospect of development.

Planning permission can provide greater certainty about what can be built, although it does not automatically create a particular value.

The detail of the permission, the number and type of units, associated conditions, costs and viability of the scheme all remain important.

For more information, see: How Much Does Planning Permission Add to Land Value?

Development Potential Can Make a Significant Difference

Where land has credible development potential, the possible value of that future use can be an important part of assessing the land.

However, development potential should not be confused with a simple assumption that planning permission will eventually be granted.

A purchaser will normally need to consider the likelihood of securing planning permission, the potential development capacity of the site and the costs and risks involved in bringing the opportunity forward.

This is why a site with development potential may be worth more than land used only for its existing purpose, while still being worth substantially less than a fully consented and immediately developable site.

The Amount of Development Matters

The size of a site does not necessarily tell you how much development it can accommodate.

Two sites of the same acreage can have very different development capacities.

A site’s shape, layout, access, surrounding development, topography, environmental constraints and planning considerations can all influence how much development may realistically fit on it.

For example, an acre that can accommodate several appropriately designed homes may have a very different development proposition from an acre where only a single dwelling is realistically achievable.

Access Can Affect What Land Is Worth

A site may have an attractive location and apparent development potential, but access can be a significant consideration.

The availability and suitability of access can affect whether a development is practical and what works may be required.

Considerations may include:

• the existing highway connection;
• visibility and highway safety;
• the ability to create a suitable access;
• the capacity of surrounding roads;
• pedestrian and cycle connections; and
• the cost of any required highway improvements.

If substantial access works are required, the associated cost and risk may affect the amount a purchaser can justify paying for the land.

Infrastructure and Development Costs Matter

A development opportunity has to work financially as well as from a planning perspective.

The costs of bringing a site forward can include:

• construction;
• professional fees;
• highways and access;
• utilities and infrastructure;
• planning obligations;
• finance;
• marketing and sales; and
• abnormal or site-specific costs.

Where costs are unusually high, they can reduce the value that a developer or other purchaser can justify paying for the land.

Local Property Values Can Influence Development Land Value

Where land has residential development potential, the value of the completed homes is an important part of the development equation.

A developer considering a site will therefore need to understand the local market for the type of development being proposed.

If completed properties are likely to achieve strong values and there is sufficient demand, this may support a stronger development proposition.

Conversely, weaker end values or limited demand can restrict what a developer can afford to pay for the underlying land.

Market Demand Also Matters

Land does not have a single value in isolation from the market.

The number and type of purchasers interested in a particular opportunity can influence the price that may ultimately be achieved.

For example, land suitable for a type of development that is actively sought by local developers may attract more interest than land requiring a more specialist purchaser.

Competition between purchasers can therefore be relevant when a landowner is considering how best to bring an opportunity to market.

Why Two Similar Sites Can Have Very Different Values

Imagine two one-acre sites on the edge of the same village.

Although both sites contain one acre, their development economics could be very different.

This is why comparing land purely by acreage can produce a misleading picture of value.

Does More Land Always Mean More Value?

Not necessarily.

Additional land can be valuable where it increases the development capacity or usefulness of a site. However, simply having more acreage does not automatically create proportionally more value.

Some parts of a larger site may be required for access, landscaping, open space, drainage or other purposes and may not produce additional development value in themselves.

The relationship between land area and value therefore depends on what the additional land actually contributes to the opportunity.

How Can I Understand What My Land Is Worth?

There is no single factor that determines the value of every piece of land.

Instead, a meaningful assessment should consider the combination of:

• location;
• planning position;
• development potential;
• development capacity;
• access;
• infrastructure;
• constraints and abnormal costs;
• local property values;
• market demand; and
• the risks and timescale associated with bringing the land forward.

Looking at these factors together can give a much more useful indication of the potential of a site than relying on a generic price per acre.

If you are unsure whether your land could have development potential, you can request a free land assessment from Revive Estates Group .

Frequently Asked Questions

What makes one piece of land worth more than another?

Factors can include location, planning position, development potential, development capacity, access, infrastructure, constraints, local property values and market demand. The intended use of the land is also important.

What factors affect land value?

Land value can be affected by its location, planning circumstances, potential uses, access, infrastructure, development costs, constraints, market demand and the value of the use that could realistically be achieved.

Does the size of a piece of land determine its value?

No. Size is an important factor, but it does not determine value by itself. A smaller site with strong development potential may be worth more than a larger site with significant constraints or limited development potential.

Does planning permission make land more valuable?

Planning permission can increase value by providing greater certainty about what can be developed, but there is no automatic or fixed increase. The value will depend on the permission and the economics of the resulting development.

Can land without planning permission still have value?

Yes. Land without planning permission may still have value based on its existing use or where there is a credible prospect of achieving an alternative use. The level of planning risk is an important consideration.

Why can two fields next to each other have different values?

Their planning position, access, development potential, constraints, services, physical characteristics or potential uses may be different. Even small differences can affect the economics and feasibility of a potential development.

Is land with development potential worth more than agricultural land?

It can be, but development potential needs to be realistic. The potential value of an alternative use must be considered alongside planning prospects, development costs, constraints and risk.

How can I find out what my land could be worth?

A site-specific assessment is generally more useful than applying a generic price per acre. The assessment should consider the site’s location, planning position, potential use, development capacity, constraints, costs and market conditions.

Related Landowner Guides

• How Much Is Development Land Worth Per Acre?
• How Do Developers Value Land?
• How Much Does Planning Permission Add to Land Value?
• How Much Is My Land Worth to a Developer?