Valuation of Farmland PDF

VALUATION OF FARMLAND FACTORS INFLUENCING VALUE/USE OF FARMLAND 1. SOILS Soils are often classified by their texture. TYPES  SAND SOIL - Are well aerated and absorb water easily, - They do not hold water, - They are a poor storehouse for plant nutrients. Soil Type…..  CLAY SOIL - Finer so...

VALUATION OF FARMLAND FACTORS INFLUENCING VALUE/USE OF FARMLAND 1. SOILS Soils are often classified by their texture. TYPES  SAND SOIL - Are well aerated and absorb water easily, - They do not hold water, - They are a poor storehouse for plant nutrients. Soil Type…..  CLAY SOIL - Finer soil particles, - Holds too much water and does not provide adequate aeration,  LOAM SOIL - A mixture of sand and clay and vegetation nutrients. Factors…. 2. TOPOGRAPHY AND SLOPE  The terrain form and slope of the farm plays an important role in determining the agricultural potential of the farm.  Erosion susceptibility of land and the potential of mechanising are some of the factors that are directly affected by the steepness of land. Factors…. 3. WATER RESOURCES - Rainfall - Availability of streams, rivers as well as legalities such as water rights - Man made sources; dams, boreholes, water storage- reservoirs - Availability of water plays an important value contributing factor to agricultural property.  Factors… 4. CLIMATIC CONDITIONS AND RAINFALL  Climate is the single most important natural resource governing the potential viability of the farm since it is from this source that all other natural resources are derived.  Climate is defined by the following measures - Rainfall distribution - Temperature - Drought frequency, humidity, frost incidence, hail expectance etc. OTHER FACTORS  Transport facilities - Transportation costs are an important component of farming costs and the location of the farm in relation to marketing points is important  Accessibility - The farm should be accessible during all climatic conditions for all farm operations Other Factors…  Improvements Improvements are divided into three CLASS A:These are improvements such as farm houses which are though essential do not contribute to the productivity of land. CLASS B: Improvements which are an integral part of the farm such as dams, canal, dipping facilities etc. CLASS S: These are specialised improvements such as b & b s and restaurants which may be found in certain agricultural enterprises Other Factors…  Labour The availability of labour whether seasonal or permanent is important Servitudes Powerlines, right of way, pipe lines etc Irrigation Infrastructure Permanent crops Alternative uses: Farms which can be used for residential development tend to be highly priced OTHER FACTORS  Government policy and legislation - Government aid to agriculture (subsidies) : they promote food security and profitability to farmers - Regulation of markets: price controls - Water legislation: National Water Act requires registration of water use- permits and rights - Land Restitution (land claims & labour tenancy) & labour law (minimum wages): decreased supply & opportunism (high prices for govt) - Land Tax (municipal rates) : reduce value of land Other factors  Technological progress: Micro and drip irrigation technologies ensuring more efficient water use  Political issues and security: prices affected negatively by violence , unstable political environment, crime and theft  Economic Climate - Inflation - Exchange rate - Interest rate - Availability of finance - Supply and demand Classification of Land Agricultural land can generally fall within the following classes: - Grazing land - Arable land - Irrigable land - Irrigated land Farm Valuation Procedure  The normal standard valuation procedure applies to farm valuations.  When doing farm inspections, the following value forming attributes need to be established; - The extents of various land use components of the farm - Lands: under irrigation, irrigable or dry Procedure… - Grazing: cultivated, natural, arable - Plantations: type and age of trees - Orchards: under irrigation, dry, type and age - Buildings; type and usage - Soil series - Volume, quality and quantity of water and type of irrigation system in case of irrigated land Procedure… - The carrying capacity of the natural grazing - The climatic information of the property, ie rainfall, temperature Procedure…..  Identify the market in which the property will be traded, the supply and demand for similar properties;  Trace recent sales of comparable properties;  Identify and inspect the comparable properties  Do the necessary adjustment to conclude the valuation. Sources of information  Rainfall maps  Topocadastral maps  Soil classification maps  Geological series maps  Bioclimatic sub-regional maps - Most of this information can be obtained from the departments of Agriculture and department of Water Affairs. Or at Agis website http://www.agis.agric.za Methods of Valuation  Comparable Sales Method  Cost Method  Accounts Method End  Thank you.