Land prices vary considerably and are affected by a range of factors. If you are buying land to self build it is always worth doing your own assessment of the seller’s valuation, just to make sure that the price is realistic. It might even give you the confidence to negotiate a bit harder if the agent has over egged it a bit.
Factors affecting prices include:
- The classification of the land – Can you build on it?.
- Location – Nationally and locally.
- Prices of surrounding properties.
- The characteristics of the plot.
Agents estimate plot prices by working backwards from the anticipated sale price of a completed house. They will deduct the build costs and a little bit of profit for a builder or developer who might purchase the plot.
Price of Land = Final House Price – (Build Cost + Builder’s Profit)
Estimating the Value of a Prospective Plot
- Start by researching prices of properties in the surrounding area, similar in size and style to the one you intend to build. You can do this on the Internet by simply entering the postcode on a property website like Rightmove or Primelocation.com to quickly get a good idea of prices in the area.The land registry publishes the actual sale prices of properties. Search these by visiting sites such as Nethouseprices. Enter the postcode in the search box and the site will list properties sold in the area, the amount they changed hands for and when.
- Use a build cost calculator to establish a ball-park build cost. Homebuilding and Renovating Magazine have a good one in their back pages.
- Subtract your build cost from your final price and hey presto you’ve got an idea of the maximum figure you would want to pay for the plot (and costs) in order to break even.
The market is littered with plots that have been on there for years simply because they are priced too high and although this is a fairly blunt method of calculating land prices, it gives you a quick assurance that you won’t be paying way over the odds.
Return to our Buying Land section for more information on where to look and what to look out for.
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