Land value component for apartments

It's generally considered good practice to ensure that the land component of a purchase encompasses a large share of the overall price you pay for a property.

This is quite easy to calculate, we look at the comparable property/vacant land sales to determine the value of land per sqm and run the math for our property of interest.

For apartments, we simply need to determine the share of unit ownership for the apartment in question (which can be retrieved from the strata/valuer general report) and multiply that by the value of the land.

My question is on the land value itself. Let's say the valuer general values the unimproved land at $2m for a 500sqm block. If my units were 40/400, then the land value would be implied at $200k (i.e. $2m*(40/400)).

However...land generally becomes worth more per sqm as we split it up (e.g. subdivide). Indeed for an apartment block, we get to use the same amount of land for each level of apartments, increasing the utility and thus value of the land per sqm.

Wouldn't this mean that the value of the land is greater than the quote on the valuer general's report? Their numbers are based on standalone unimproved value but this isn't the case for an individual unit in an apartment block.

In that case, how do we calculate the correct land value per sqm for an apartment?

Hope this makes sense, looking forward to any comments .

 

I'm not sure I'm on board with this logic. Because it costs money to "subdivide" in this way, and it doesn't increase the utility - it just locks it in.

 

Unimproved value of the area of land is used. This disregards how well utilised the land is and its potential use. ie The assessed value is a cleared site of 500m2. It doesnt consider that a 600metre high tower can be built on it or a single flat open car park. It considers what the sand dune is worth facing the beach at Surfers Paradise as a site.

Each strata entitlement % determines the portion of value for that owner. The owner of a 100m2 penthouse and a 100m2 windowless basement would have the same value for land assessed