What’s involved in a standard rural valuation?
A rural valuation differs from a regular property valuation.
“First, we’ll sit down with the farmer to get a sense for how the operation works,” says Geoff Beaumont, Senior Registered Valuer at JLL New Zealand. “Being a part of that journey is the most rewarding part of rural valuation.”
Following this, an inspection is carried out, looking at everything from the condition of pastures to improvements and equipment.
“We then ascertain the market value on an average efficient basis - not highest performing,” explains Beaumont. As with any business, alternative management can yield vastly different results due to a number of variables, including access to capital, education, and inherent skills.
“Valuing on an average efficient basis gives us a benchmark for its productive capacity while isolating specific management factors. Essentially, we’re calculating its value based on an average efficient manager coming in and operating it at an average efficient production level.” In dairy farming, for example, there are a number of production systems a farmer can operate by. “System 1 is low input with minimal external supplementation needed to feed the herd, whereas system 5 is high input, so feed input could be greater than 50%.”
After the inspection, the information acquired from the on-site visit is used to generate a high-quality, data-rich report.
How rural land is valued
The first stage in assigning value to farmland is to get acquainted with the local market. Thorough research of the land market will help to provide an indicative price range, although it’s just a starting point. When it comes to rural land, it’s not an apples-for-apples comparison, as every piece of farmland has unique traits that can affect its value.
A valuer will explore recent sales data, similar properties, demand-supply dynamics, and the historical price trends of rural land in the area. They will also note any improvements made and the potential uses of the property, as this can greatly influence its market value.
“We’ll use these insights to ask, if this property was listed for sale on the day of valuation, what market price is it likely to achieve?” explains Beaumont.