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What does land cost these days?
It seems that the only thing increasing faster than the cost
of land today is the demand for it. To the casual observer
it might appear that there is plenty of vacant land, yet
many factors have come together to create a time in which
land is not only increasingly unavailable, but selling at
record prices.
The Milwaukee Journal Sentinel's June 17, 2000 issue,
stated: "The average price for an acre of farm land in
Wisconsin rose by 24% in 1999, the largest one year increase
in at least 20 years, according to a state report released
Friday (June 16th)."
The Wisconsin State Journal's August 11, 2001 issue stated
that "The state's farmland is worth 18% more this year, the
largest increase in the nation, a new survey shows", THAT'S
A 42% INCREASE IN PROPERTY VALUES IN ONLY 2 YEARS!
A March 31, 2000 article in the Wisconsin State Journal says
that farmland prices vary from $4,000.00 per acre in Dane
County up to a record $68,400.00 in Vilas County. On the
surface $4000.00 per acre may seem like a good deal, but one
must remember that this price is for one whose budget will
allow the purchase of large tracts of land totaling,
perhaps, one hundred acres or more. This would be a farmer's
or a developer's cost and does not include the costs of
preparing the land for resale. Also, remember that this is
referring in many cases to open, treeless land, not premium
vacation or residential property.
It is also important to remember that buildable land is not
priced by the acre. Unless you are buying large tracts of
land for agricultural purposes, the price probably not be
reflected in "per acre" units. There are virtually no
development costs associated with agricultural land. Just
like city lots, rural building parcels, regardless of size,
are priced based on the raw land costs and the costs
associated with preparing the land for sale. Even if you
could purchase 5 or 10 acres of undeveloped land, by the
time you pay for an access road or driveway, surveying, soil
testing, and electric and telephone service to the property,
your cost per acre will be considerably higher.
In some extreme cases (often waterfront related) we
sometimes hear statements like this one made after a study
done in the 1990's by the Department of Natural Resources
and the Wisconsin Lakes Partnership, "In some northern
counties, property values have increased as much as 400% in
the last 5 years!"
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Why is land getting so expensive?
There are many reasons including, but not limited to, high
demand. As Wisconsin's rural land continues to be developed
and cities and suburbs swell into the surrounding
countryside, land use committees prescribe zoning
regulations designed to keep population density confined to
the cities. Every year, more and more townships are adopting
zoning laws that mandate 35-acre minimum subdivisions. This
means that any new development will have to be in parcels of
land that are 35 acres or larger in order to build one
single-family home in the country. With land getting so
expensive, the cost of 35 acres is prohibitive for the
average consumer.
Other factors resulting in the high cost of land include its
nearness to metropolitan areas (commutable distance) where
work can be found. If the land is wooded, has water
frontage, a nice view or a high degree of seclusion, it will
also be more expensive. Quality lake frontage is always
expensive. A general rule is "the larger the lake, the more
expensive the property." Having a nice sand beach on a lake
property, which many of us desire, adds considerably to the
cost of a lakefront property.
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Will the price of land ever come down?
The industry analysts don't see that happening. It's the law
of supply and demand. Many people waiting for the price of
land to come down can't imagine that the cost of land will
continue to increase. Ten years ago, these same people
thought land was too expensive! The wiser consumer looks 10
years into the future and considers what land will cost
then. With that perspective, today's prices seem much more
attractive!
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