Finding Unimproved Value

Press, Volume CV, Issue 31001, 5 March 1966, Page 10

Finding Unimproved Value

T ET us return to Canterbury. A farm has to be valued under the Valuation of Land Act, 1951. As far as the capital value is concerned the valuer has to ask himself what the farm would bring if put up for sale (as previously explained). He analyses all available comparable sales to assist with his answer.

Next comes the unimproved value. He endeavours to find sales of undeveloped land or partially developed land to guide him in his assessment. He has to visualise the farm concerned as if it alone were completely unimproved and the rest of the district is in its present state with roads, bridges, telephones, power and all the services that exist. Visualise a farm in the light land of the AylesburyKirwee district. Sales indicate a capital value of £7O an acre depending on location and the type of house and the standard of other improvements. Now think of the unimproved value of this 750-acre property, without any improvements and still under the same cover as when the district was first taken up. Records show that this was dominantly silver tussock and perhaps a little matagouri. What would you give for 750 acres in that state today?

Your first reaction is—what would I have to do to it? Burn off the tussock and plough it! Neither an expensive item.

The land still possesses the virgin fertility «f the area, the tilth of the soil is unspoilt by exhaustive crops,

and the buying public indicates that it is ready to pay very good prices for this type of country.

If you took the £7O an acre for developed farms and worked backwards—that is estimated the cost of all the improvements required and deducted them would you get the unimproved value—or the price you would pay? Not necessarily, because cost is not value and also because such analysis has shown again and again that farmers discount their own efforts and also tend to capitalise on the tax deductions involved in such development. On this class of land the result could be much closer to the mark

than on land needing much more development. Let us estimate the cost of the items required to bring this 750 acres to the standard of many farms in the locality. House and garage and water supply, £6000; wool shed and yards, £3500; implement shed, £750; two hay barns, £900; men’s whare (well equipped), £400; small sheds (would you have a cow shed?), £5O; total buildings, £11,600. Fencing, £6250; pastures and clearing at £B, £6000; shelter (250 chains at £4), £1000; telephone, power and rroading, £250. A grand total of £25,100. Questions

This amounts to £36 an acre for the improvements, leaving £34 for the price of the land in tussock. Now ask yourselves two questions: could you buy this 750 acres today for £34, and then low much would you be prepared to pay? I admit it is . hypothetical question, but I suggest seriously that if such a 750acre area could be placed on the market it would bring nearer £5O an acre. I could have instanced the Te Pirita district where large areas of land, quite undeveloped, have been broken into separate farms in the last 10 years. Go down, there today and see what you have to pay for 750 acres in tussock and remember the district is not so well favoured as the area I have selected. You would get a shock at the prices being asked. Added Value The value of the improvements is defined as the added value they give to the land. This added value can vary according to the quality of the land as a little thought will show. Think of a house costing £7OOO on 400 acres of the best heavy land in Ellesmere. If the same house were built on a small farm on the clay downs where reversion to gorse and scrub has occurred, would it be worth £7000? It could not possibly (give this amount of added I value to the land which it has ! overcapitalised. This does hapjpen from time to time. Iml provements are valued on the i basis of their added value to ithe land. Replacement costs | are used as a guide to their 'value. Increases in capital value must mean an increase in the value of the improvements generally and a study 'of revision values for any farm will bear this out. ; (To be continued.)

[The accompanying article is part of an article on the Land Valuation Act written by Mr M. B Cooke, senior lecturer in rural valuation at Lincoln College. Opinions expressed are Mr Cooke’s own and may not be those of the college or of the New Zealand Institute of Valuers of which he is president.]