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Land value for units.

Discussion in 'General Property Chat' started by Michael Feynman, 20th May, 2016.

  1. Michael Feynman

    Michael Feynman Member

    18th May, 2016
    Sorry, long-ish post (and my first, outside of ‘Introductions’).

    I’m fairly new to investing (I do have one small investment unit in Canberra, but thinking about adding more). In Canberra, it’s very easy to obtain data for land value of any property and I’ve been working out the underlying land value for the individual units I’m looking at.

    I can’t quite decide how important I think land value for a unit is. I understand that for a house it’s the value of the land that really drives capital gains. Can I assume the same for a unit?

    I imagine that the value of a large block of land with units would change in a roughly similar way to land for houses in the same area, although somewhat influenced by demand/supply of units. If that’s correct, would you expect the increase in the land value to actually flow through to the value of the unit (like it does for a house)? Obviously it’s a lot harder to realise any land value if you own just a tiny fraction of it.

    Units have performed very badly in Canberra in the last few years (due to oversupply), but some of the numbers are now quite attractive - the yields are high and the underlying land value for many of them is also quite substantial. On a related note, does anyone know where I can get good quality data about how many units are currently being developed or on the market in Canberra compared to buyer demand for those units?

    Would be really interested to hear other people’s thoughts on this.
  2. peastman

    peastman Well-Known Member

    18th Jun, 2015
    The way I see it is that it's not the land that's important to growth, but the change of use for that land.
    For instance, when a farm is subdivided into house lots, the square meter value of the land goes up. When the house block is divided into townhouses, the square meter value of the land goes up. When the townhouses are redeveloped and a highrise is built, square meter value of the land goes up.

    So, if you invest in units that will never be redeveloped, you will not get the growth of a property that can be redeveloped. However, that does not mean you will not get good growth. Obviously a good, well located property will always be in demand and therefore will attract good growth, regardless of land size.
    Michael Feynman and Leo2413 like this.
  3. Leo2413

    Leo2413 Well-Known Member Premium Member

    18th Jun, 2015
    Sydney, Brisbane, Taiwan, London
    Its not the land that's so important as there are copious amounts of land in Australia pretty much worthless. Its A) Where the land is, B) What use does the land have C) whats sitting on the land and D) whats the demand for land its self in any particular suburb. All those factors are super important, imho.
    Michael Feynman likes this.