Friday, 19 February 2016

Killer Arguments Against LVT, Not (384)

I was chatting to somebody who is quite sympathetic to the idea, and he said that he assumed somebody who owns an acre of central London would pay more than somebody who owns an acre of Scottish farmland.

Yes of course, I replied, the London landowner would pay a hundred thousand times as much. He said that sounds a bit extreme - he would only expect the London land to be worth twenty or thirty times as much as the farmland.

So I did a couple of calculations for him (all figures for annual rental value).

Scottish farmland, £50 to £100/acre (not worth taxing, if truth be told).

Average UK home £12,000 x 2/3 location value x ten homes per acre = £80,000/acre

Office space in UK city centres excl. London = £50/sq foot plus £20 Business Rates x 9 (for sq yards) x 4,840 (for acres) x 5 storeys = £15 million. Knock off 10% for running costs and 50% for the land used for car parks, light wells, access, pavement etc = £6 million/acre.

Shop space in most expensive shops on Bond Street, London is £1,000 per square foot with £100 for four storeys of offices above, do the same calculation as before (Business Rates are lower as a percentage), you end up with £30 million/acre.

So the relative values are:

Farmland = 1

Residential = 800

City centre office space = 60,000

Bond Street, London = 300,000

The most expensive land of all is AFAIAA the Coca Cola sign in Piccadilly Circus, the rental value is over £20 million a year ÷ by area of land used virtually nil = value per acre more or less infinity. The sign/location alone, ignoring the shops and offices below it, is worth the same as 200,000 acres of farmland (a farm the size of Midlothian).


Dinero said...
This comment has been removed by the author.
Dinero said...

What's the ratio of residential land rural Scotland to inner London

Mark Wadsworth said...

Din, do the maths. A few hundred to one?

Steven_L said...

Do we know who owns the sign?

Mark Wadsworth said...

SL, no idea, is it important?

Bayard said...

Well, it might be an example of pure location value, if the building that supports the sign was long since sold separate from the right to have the sign there and to dictate what was on it.

Mark Wadsworth said...

B yes, but for Business Rates purposes, the sign is (probably) separately assessed anyway.