The Effect of Environmental Constraints on Land Prices

The value of land is an important component of any farming business. Often it is the largest balance sheet item, a key determinant of farm ownership, and a key factor in the level of debt a farming business incurs.

There are three fundamental drivers of land value:

• Productive value - the value relative to the rent, or profits, obtainable from the land;
• Consumptive value - this includes amenity factors such as recreational opportunities and scenery, plus intangibles such as the countryside is a nice place to live, a great place to bring up children, you’re your own boss, and farming is a great lifestyle
• Speculative value - the ability of an asset to retain its value/the return on the asset as an investment.

In addition there is a lesser fourth component; transactional factors, which may affect the price on the day. These include forced sales and family transactions.

Read the report to find out more.