Why does land appreciate? It’s a matter of supply and demand. With the exception of about 30 acres per year of volcanic lava flow adding new waterfront property in Hawaii, the size of the United States has stayed very consistent for a long time.
Since the days of the early explorers, property values have risen. Here are a few reasons why:
“Buy land. They’re not making any more of it.” This was good advice when first coined, and it likely remains good advice today. Anything that is in limited supply with ever growing demand is a pretty sure bet for the long haul.
Population Growth. Three million more people and one million more households each year are the impetus behind the increase in demand. The growth creates an ever present need for new homes, apartment buildings and infrastructure like roads, utilities, shopping centers, offices, airports and schools.
Homes vs. Farmland. All those additional people also create a need for additional food and, therefore, agricultural land. Paradoxically, agricultural land is often converted to neighborhoods to make room for more people. The result? Higher prices for both food and land.
Proximity to Employment Centers. As land near metro areas is built out, parcels beyond the edges of easy commuting distance become more valuable. Existing homes with convenient locations continue to rise in value, as many prefer to pay more for a home and less on the commute.
Supply and Demand. There is nothing to suggest that our land mass will grow or that the population will not. Outside of the normal economic cycles, this also suggests a continuation of exactly what we’ve seen in the past, which is rising values over time.
The areas of Washington State which are experiencing (and historically have experienced) the highest rates of appreciation are mostly developed. The populations in these areas are growing. In some cases there isn’t any land left at all.