Price of Land

It is the price at which land is bought and sold in a certain region and at a certain point in time, which presupposes the existence of property in land.

Uncultivated virgin land is a gift of nature, not produced by labor. Therefore, land has no value if the labor involved in clearing it and improving it is not taken into account. But land, like other commodities, can be bought and sold and has a price. Its price is not the money expression of the value of land. The purchase of land is essentially a purchase of the expected net return on the land over a certain period of time. The quality of land varies, and its price differs. Under the capitalist system, as Marx pointed out, the price of land is equal to capitalized rent. The formula for calculating the price of land is: price of land = ground-rent / interest rate. Assuming that the annual rent of a piece of land is £300 and the interest rate is 5%, the price of land will be £300 : 0.05 = £6,000.

It can be seen that the price of land is directly proportional to the amount of ground-rent and inversely proportional to the interest rate. Under the conditions of the capitalist mode of production, with a rise in the ground-rent, the interest rate tends to decrease and the price of land tends to rise gradually. In real economic life, the price of land is also affected by other factors, such as land system, urban planning, land-use plans, land-related policies, population, level of economic development and domestic and international political and social environment, as well as geographical location, infrastructure and environmental quality.