LAND VALUE - ITS POTENTIAL TO CREATE MORE PRIME LOCATIONS
 


If property equals land plus improvements (buildings, sewerage, water supplies, crops etc) how is it that land data does not exist as a private or government database?

In modelling of physical processes and structures, there is always near complete understanding of "boundary conditions", so that in the real world of oil tankers stressed by freak waves, tall buildings hit by hurricanes or earthquakes, the actual outcomes are mostly satisfactory. Otherwise the graves of sailing boats would also be littered by sunken cargo boats, cruise boats would disappear and Ronan Point [1] or "bridge" failure would be replicated thousands of times. So in 99.9% of instances engineers are using the right data, correct modelling tools and construction and operating firms build correctly.


On the contrary in the property sector there is a lack of data, in consequence poor modelling and "unsafe" outcomes, such as excessive borrowing to inflate the property bubble.

In a 2006 Bow Group pamphlet [2], Mark Wadsworth reminds us that in "property", there exists no database of individual plot sizes and values even though the UK global value for residential land can be estimated. This is an astounding £ 2,400 bn, ie 60% of the total "residential property" value of over £ 4 trillion in 2006.
Thus the tail of land prices wags the dog of property outcomes.

Perhaps Wadsworth has been reading the renowned engineering Professor Petr Beckman on negative feedback ---

Beckman explained bubbles by way of humorous anecdotes about gerkin shortages in his home Czechoslovakia. (see FEEDBACK).

Certainly Hayek and more recently Friedman shied away from an analysis inside the turbulence of property booms and busts, with the discomfort of laymen asked to enter a nuclear reactor.
This was inevitable since economists have never called for land value data to be recorded. Employed by the state or big business especially financial interests and easily overawed by the property barons, economists happily ignore the data under their feet.
These bad-economists were therefore incapable of attempting an insiders model which factored in easily observable "boundary conditions" such as homelessness, negative equity and the rush to London and the South East rather than to where property was cheaper.

LAND VALUE DATA
Wadsworth recommends use of banding in a land valuation process. This is an excellent idea. It could easily be coupled with a self valuation process via a website question and answer session.

In my uncle's case with ten commercial properties and 50 tenants under his control, he estimates, he could band his land content in less than half a day!