10 Reasons Land Prices Are Soaring

10 Reasons Land Prices Are Soaring
Land investment is making it mainstream
Mark Twain famously said, "Buy land, they aren't making it anymore," and it seems the concept is finally hitting the mainstream. The price of land has risen dramatically over the past year, alongside record growth in real estate prices. For those on the hunt for land to buy, here are 10 reasons prices are soaring.
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1. All real estate is going up
The value of all real estate is up -- big time. Inventory is at historic lows, and demand exploded after the pandemic, resulting in an epic seller's market. The median sales price has risen over 19%, on average, across the country over the last year. And when house values go up, so does the value of the land the home sits on.
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2. People are able to move away from the cities
During the pandemic, employees got the freedom to work remotely. That meant they could earn their high city wages yet relocate to a more secluded location. Fresh air, fewer people, and less stress. Things have returned to somewhat normal, but the freedom to work from home has remained for many, further supporting the increase in land values because of higher demand.
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3. Food prices are rising
Food costs are up 8% since last year. Supply chain disruptions and rising fuel costs have made the current industrial food system less viable. In the current supply chain, food from around the world was cheaply shipped from the farm to commercial distributors and right on down the chain.
Shifting to a nationalized or more localized food system means lower shipping costs and no political jockeying to worry about. And that means developing currently unused land into productive agricultural lands, which, of course, increases the value.
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4. Land is finite
It seems like cities could expand forever, but eventually, all places will run out of space. As cities sprawl, undeveloped land dwindles. Land is needed to grow commodities, house people, and support the infrastructure that our world runs on.
This finite resource will obviously increase in value as it becomes less available, just like any other finite resource on our planet.
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5. Developers are purchasing
It's one thing when a homeowner who's looking for a quiet place to live purchases land. It's another when a developer can buy that same piece of property. Because they are coming with a business model and the money to put the plan into action, they are often able to pay a premium for a parcel.
They can go through the rezoning or development of a single property into several residential lots or even a multifamily apartment complex. This further drives up the prices for anyone interested in land acquisition.
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6. Timber is more valuable
During the pandemic, supply chain disruptions and increased home improvement projects sent the price of lumber soaring. And while there has been a bit of relief as mills started up operations again, the demand has not slowed a bit.
This has affected not only the prices on the store shelf but also the raw goods themselves. Purchasing land for timber harvest has been a tried and true investment model, but it's currently even more lucrative than before.
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7. Cities are growing
The suburbs of the suburbs are now a thing. Populations are ever-increasing, and all these people need good-paying jobs. That means people are heading to the city or near the city to earn those top wages.
Although many developers happily build up, the sprawl almost always goes outwards, too. Land near cities is especially valuable because of the imminent demand the location holds.
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8. People are looking to grow their own food
World politics and economic instability, among a host of other confounding factors, have created global food insecurity. Many people are now looking to become more self-sufficient and less reliant on the industrial food system by purchasing land they can grow food on.
And these modern-day homesteaders need plenty of land to do so, adding to the demand for workable land.
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9. Long-term appreciation
Real estate has been an inflation hedge since the beginning of modern civilization. People always need shelter, which carries the price of housing or land up with the inflation of the currency. That means, with very few exceptions, the value of real estate appreciates over time.
Having a store of value plus the typical passive income associated with holding real estate makes it a solid investment. Land holds the same potential value houses do, with a lower buy-in point.
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10. Tax shelter
There are multiple ways to utilize land to reduce or offset taxes, depending on your particular financial situation. Whether you use a traditional 1031 exchange, hold the land in your IRA or 401k, place part or all of it into a conservation easement, or sell the timber as a recovery of capital rather than capital gains, the tax advantages can be significant.
With many investors generating significant income in other areas, purchasing land can help offset the tax bill but, ultimately, further drives land prices upwards.
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Land values are up, but so is demand
Investing in land allows the owner considerable freedom when it comes to its use. Whether they are looking to develop it, farm it, or speculate on it, the land can offer an opportunity to make money. And when something is profitable, people become interested in it. This drives prices upward until demand and supply balance out.
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