Is Land Size Still King?

As property markets evolve, so do the factors that influence successful investment strategies. While traditional views have often placed significant emphasis on land size as a key driver of property value, this perspective is gradually shifting. In today’s market, especially in urban areas, land value is becoming more critical than sheer land content. Understanding these changes is crucial for investors who want to make informed decisions in a dynamic and competitive environment.

In this video, we’ll explore the evolving importance of land size versus land value, particularly in the context of modern property investment strategies. We’ll also highlight insights from The Property Couch Podcast that delve into this topic in more detail, helping you navigate the complexities of the current market.

Recommended Podcast Episodes

To further expand your understanding of this topic, we recommend the following episodes from The Property Couch Podcast:

• Episode 484: Cracking the Code Mastering the 60% Land to Asset Ratio
  • This episode discusses the importance of land value over the dwelling’s value, exploring a 60% land to asset ratio, which is significant in ensuring long-term returns.
  • Listen here.
• Episode 418: The Hidden Forces Driving Property Values (2)
  • This episode covers various land types, their values, and how productive use and location significantly affect land value.
  • Listen here.
• Episode 468: Why Don’t We Start with Property First and the Hidden Power of Building a Moat
  • This episode discusses the four critical areas to consider when buying real estate: price, location, size of land, and quality of the dwelling. It also highlights how land size may vary based on market dynamics.
  • Listen here.

Transcript:

Look in my view, I think land size isn’t king anymore and I think in the 20th century it was and its largely driven by baby boomers who had the Great Australian Dream as an aspiration and their idea of the Great Australian Dream was a detached house on a quarter acre block, surrounded by garden with a barbecue in heels hoist and that was represented by TV shows that you watch at that time. If you watch Neighbors that it was you know in housing, Country Practice, Coronation Street. It was all regarding to detached houses but if you think about the shows that Generation Y watching, the norm for them is apartment living generally New York apartment living.

If you think Seinfeld, you think Friends and you think How I Met Your Mother, those types of programs are all high-density apartment living that Generation Y has grow up seeing as the norm.

So I think that it’s important to understand that the shift is happening, baby boomers will soon not be the dominant force in the workplace because they’re starting to retire and generation X and Generation Y will soon be the dominant players in the workforce. So it’s important to understand what Generation Y want and if they’ve grown up seeing apartment living, the budget will only allow them to buy apartments, they’re not prepared generally to move further out from the city to get more land and they would rather live in a townhouse than a house just so that they can stay closer, I think it’s important to understand that in the 20th century land content or land size is king but in the 21st century I think land value: is king.

If you’re faced with the decision as an investor whether,

“If I’ve got five hundred thousand dollars to spend and I can buy a property that’s further out that has more land content and that’s a house or I can buy a two bedroom apartment that has you know maybe one of twenty and its on a smaller parcel of land where you can say that’s mine and it’s got a really high land value because it’s surrounded by many beautiful Victorian or beautiful Edwardian and I can walk down the road and get a cup coffee, I can get around two blocks away, jump on the train and get to work.”

If that land value is so in demand, in my view, and it’s a little bit simplistic but in my view and I’m comparing the two, I actually prefer the higher land value than the higher land content simply because I think that that is going to be more in demand.

So I think, in the past it’s been really relevant that land content and land size is really crucial largely driven by what’s in demand by baby boomers but it’s important to make the shift and have an understanding of what Generation X wants to live in and Generation Y is prepared to live in because at the end the day, property investments is all about supply and demand. And if the demand exists for that land value versus the land content, chances are that will be what’s going up in value.