What is land value?

Definition of Land Value

Land value is a measure of how much a property is worth excluding any structures built on the land. This valuation includes both the value of the raw land as well as any improvements to the land, such as better access or drainage. When demand exceeds supply, the value of land will increase. The same is true if a particular piece of land has intrinsic value, for instance, it’s found that the land contains oil reserves.

Why is this term important?

Land values typically increase over time even when the value of the buildings and structures that sit on the land depreciate due to age and use. As the measure of how much a property is worth, land value reflects demand for physical space, as well as the ease of development and use of that space.

When property taxes are calculated both land value, as well as the quality and type of structure, are considered. Keep in mind the assessed value of the land and any structure may not reflect the current market price of the property, as the selling price for a property is dependent on market conditions.

Examples of term

A few decades ago, the land value in Muskoka, Ontario didn't reach past $100,000, even for lakefront property. The area was considered too far from urban development and too remote to easily build a cottage or residential development. Over time, however, urban centres such as Parry Sound, Barrie and Toronto grew and expanded. Roads and infrastructure got better and the desire to be out of the city, near water increased. All of this had a part to play in the increased, perceived value of land in Muskoka, Ontario. As a result, raw land is now at least two or three times more expensive than a few decades ago, while the sale price for already developed land or land with buildings and structures can reach up to $1 million or more.