If you’re thinking about selling land in Northern Virginia, then you might be thinking, “How much is my Northern Virginia land worth?”
To answer the question, it’s important to understand the four components of land value:
- Effective Purchasing Power
First, in order for land to have value, it has to be in limited supply. If you list a parcel of land for sale and it’s identical to 100 other parcels of land in the market, then it’s not going to have much value.
Alternatively, if yours is the only parcel of land available in an are with very low inventory, then it could have substantially more value.
Second, there has to be demand for the property. If you’re trying to sell a building lot and no one is building new homes in your area, then the land will not hold much value in the market.
On the flip side, if everyone is building new homes, then there probably will be good demand for your land and it will sell quickly at a fair price.
Third, if your land satisfies a need or a want, then it has utility. For example, land with mountain views possesses utility that similar nearby lots do not possess if they don’t have mountain views.
However, in order for utility to create the most value, it has to be coupled with scarcity.
Effective Purchasing Power
Finally, prospective buyers have to have the ability to purchase property. This is known as effective purchasing power.
Even though building sites on the Potomac River are in short supply and have great utility, a lot of buyers simply can’t afford them. These properties will likely sit on the market for longer than average.
Mortgage interest rates also have a large impact on effective purchasing power. When rates are low, like they are today, buyers can afford to buy higher priced properties. When rates are high, buyers can afford less.
The truth is, land values depend on numerous factors. However, today’s buyers have great purchasing power and overall inventory is quite low. So, it is a good time for sellers to be thinking about selling land.