The economy of the UK benefited from agriculture in 2020 to the tune of 0.5%. Half of the food we consume comes from agriculture, which also employs around 500,000 people and is a significant sector of the food and drink industry, which generated £127 billion in economic output in 2019.
We can protect our natural environment and guarantee the highest standards of plant and animal health thanks to farmers and other land managers who, in 2020, oversaw 71% of the UK's land.
To summarise the current situation of the agricultural industry, the Agriculture in the UK evidence pack compiles all available statistics on agriculture.
The area of land used for agriculture is that which is either arable, planted with perennial crops, or used for perennial pastures. Around 17.6 million hectares of the UK are used for agriculture, and an additional 3.2 million hectares are used for forests and other types of woods. 72% of the total area of land is used for agriculture, excluding woods.
To get into it let us look at a few explanations or terms.
The link between the quality of the land in terms of its general productivity and the output obtained provides a measure of the amount of sustainable land usage.
A commodity is an agricultural or mining product, such as grain and corn, which are examples of economic goods. Commodity Prices refer to the commodity prices for any upcoming year calculated as the average of the most recent prices for that year. It is published by all Selected Commodity Analysts during the most recent calendar quarter.
In exchange for a portion of the crops grown there, a landowner will provide tenant permission to use their agricultural property under a legal arrangement known as sharecropping or crop share.
R stands for capitalization rate or rate of return, and it ranges from 5% - 6%. Measurements used to estimate and compare the rates of return on various commercial real estate investments are capitalization rates, commonly referred to as cap rates. Net operating income (NOI) from the property's property asset value is used to calculate cap rates.
Example:
- Take the net or gross operating income on your agricultural land to be £125,000 monthly
- And the agricultural land cost £280,000 or has been assessed by nearby estate agents or by local planning authorities.
- Then the cap rate or rate of return percentage will be (125,000 × 12) ÷ 280,000
- 1,500,000 ÷ 280,000 = 5.35% = 5.4%
- The resulting cap rate is 5.4%
Now let us calculate the value of agricultural land
By using the income approach, we use this equation:
- V = I/R
- Value = (Productivity X Price X Crop Share) ÷ Rate of return
- Productivity Value = (Land productivity X Commodity price X Crop share) ÷ Rate of return
Let us work on a typical example
- Land productivity = 45 bu./ac
- The average price for spring wheat = is £6.07/bu.
- Crop share = 14.5%
- Capitalization rate = 5.4%, Using the above formula
- Productivity Value = (45 bu/ac X $6.07/bu X 14.5%) ÷ 5.4%
= £733.46 / acre
NOTE: bu/ac is bushels/acre; a bushel is equivalent to 36.4 litres
A land area that is equal to approximately 43,560 square feet is referred to as an acre. The measures are slightly different in agriculture, where one acre is roughly 660 feet long and 66 feet wide. This can help you comprehend the size of an acre by showing you that a building developer can comfortably place at least 18 houses onto an acre of land. An acre of land is less frequent in modern residences, but older homes may have larger gardens with acre-sized portions.
You will need to know the land's length and width in feet to calculate the acres of a given area. The land's square foot area can then be calculated by multiplying the length by the breadth. To determine the size of the plot of land, divide this figure by 43560, which is an acre's worth of square footage.
To help visualise, here’s an example:
Length = 485 feet, Width = 642 feet
Area of land = 485 x 642 = 311,370 square feet
Acreage = 311370 ÷ 43560
= 7.148…
= 7.2 acres
In different parts of the country, the answer to the question "how much is an acre of land worth" varies since the property in the south is rarer and more difficult to get than land in the north.
Currently, the value of an acre of farmland in the UK ranges between £10,000 to £20,000. The price will be significantly more if you want to purchase the land to use for your garden or to develop it into a housing complex.
Expect to pay at least £25,000 per acre, with prices rising as high as £50,000 if you wish to purchase an additional acre of land for your garden. To convert the site from agriculture, you must also get planning clearance.
In addition, if you later sell the property for a profit, the farmer who sold it to you may ask for a right of overage, or a chance to get further compensation.
You may, for example, already have reached an agreement on a payment amount with the farmer if you decide to construct the land and profit from your purchase.
Planning permission-already-granted land will be far more expensive, possibly costing you up to £300,000 in the north and £1,000,000 in the south.
deals stipulating that the price would be in the range of £8,000 to £10,000.
Naturally, costs vary depending on where in the nation you are, so you will need to do some research on what to expect in your area specifically.
Undoubtedly, having an acre of land will increase the value of your home. This is because it will enable you to have a bigger garden, which is something that many people want, as well as future development possibilities. If the land is granted planning clearance, this will increase the property's worth even further. This is due to the fact that buyers won't have to go through the demanding and time-consuming process of obtaining planning permission on their own, for which many buyers will gladly pay a premium.
Undoubtedly, having an acre of land will increase the value of your home because it will enable you to have a bigger garden. This is something that many people want, as well as future development possibilities.
If the land is granted planning clearance, this will increase the property's worth even further because buyers won't have to go through the demanding and time-consuming process of obtaining planning permission on their own, for which many buyers will gladly pay a premium.
Therefore, an acre of land would be worth £67,000 if, for example, a 1-acre piece is worth £100,000.
The value of your property may improve significantly based on the use for which you obtain planning permission. In addition, for instance, might raise the value of your property by 15% to 30%.
According to RealAdvisor, you might raise the value of your home by up to 10,000% if you convert agricultural land into residential space. This would greatly improve the overall worth of your property.
There is no set price for an acre of land, as we briefly said before, and several different factors will influence the answer to the question, "How much is an acre of land worth?" To help you understand what can affect the value of your land, we've developed a list of the considerations that every real estate agent or potential buyer will make.
How much an acre of land costs will be greatly influenced by the planned use and purpose of the land. The cost of using the land for residential uses will be substantially higher than for agricultural ones, as we already said.
Natural disaster-affected land, such as that damaged by earthquakes, landslides, or floods, will naturally be less expensive. Similarly, land next to nuclear or chemical power facilities will be affected. On the other hand, the land whose value is associated with the possibility of mining valuable resources will experience a price increase.
The cost of the land will be significantly influenced by its location, much like when purchasing a home. For instance, as we have indicated, you won't find an acre of land in the south for less than £1 million, especially if it's close to a significant city. Additionally, land near the seaside will cost more.
The price will increase if there is a lack of supply and strong demand, just like with anything else. Because there is so little land available and there is such a great demand for housing in the area, the cost of land close to London is so high. The cost of purchasing land will be significantly lower in regions where there is a significant excess of supply compared to demand.
When purchasing anything, most people place a high value on appearance, and purchasing land is no exception. If the site has attractive features like outstanding views, well-kept lawns, and level surfaces, the price will rise somewhat as a result.
How much an acre of land is worth will be greatly influenced by the economic activity of the surrounding area. For example, the establishment or growth of new businesses in a region will raise the price of land because these businesses will attract new employees and their families, increasing the demand for
The price of the land will be cheaper if the neighbourhood is run-down and has experienced business closures, as you might anticipate.
Similar to a house, the value of a piece of land will depend on its surroundings. For example, land near airports or industrial zones will be less valuable because of the increased risk of noise and chemical pollution. On the other hand, land near local amenities and schools will command a premium for its price.
Well, that’s everything you need to know about agricultural land, including the all-important answer to ‘how much is an acre of land worth’! Do you have a question to ask? Or maybe some insight to give? Whatever it may be, don't be reluctant to contact us at RealAdvisor.co.uk.
TIP:
You can contact several local estate agents to set up for them to come out and assess your property for you and provide a valuation if you own land and want to know how much it is worth.
Many estate agents would be delighted to assist you in this way because they believe that by doing so, they will be better positioned to represent you when the time comes to sell the property.
In summary, these are things to consider evaluating and calculating agricultural land:
A farmland's current cash rent split by the present capitalization rate is all that the capitalization of the rent valuation model actually captures. For instance, if a piece of farmland is currently rented out for £700 per acre in cash and the current capitalization rate is 4.5%, the worth of the farmland is £700 divided by 4.5%£ or £15,555.6 per acre.
Typically, agricultural land is land that is used for agriculture, which is the planned and systematic exploitation of other life forms. It could be used for pastureland, woodland, moorland, heathland, farming area, ploughland, etc.
Whilst farmland is land primarily designated for cultivating crops and raising livestock.
You may build, expand, or modify a structure if your agricultural land is 5 hectares or more. Temporary uses of land, agricultural structures under a specific size, forestry structures, caravan sites, and related buildings are some examples of authorised development.
31.01.2023
31.01.2023
5 min
31.01.2023
