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# How to calculate the value of agricultural land?

Thomas Miller
28.10.2022, 01:20
3 min

## How is the price of agricultural land determined?

In Switzerland, it is the Federal Law on Rural Land (LDFR) that sets a maximum price for agricultural land. This to regulate the prices of agricultural land in order to support and encourage agricultural exploitation. This maximum price is determined according to several parameters:

The characteristics of the land:

The nature of the soil, the exploitable surface and the slope of the land are essential elements to be taken into account when estimating the value of agricultural land.

Location:

The closer the land is to the town centre, public transport and shops, the more valuable it will be. On the other hand, an off-centre plot will attract very few buyers.

Historical sales:

In order to stay close to the real estate market prices, the LDFR uses the transactions prices of farmland sold over the 5 past years in the same region.

The usability of the land:

The acquisition of agricultural land is made for the purpose of farming. The more profitable the farming operation, the more valuable the land will be.

The constructibility of the land:

The sole function of agricultural land is to be used for agricultural purposes. However, it is possible to apply to the municipality for permission to convert an existing construction, to a building linked to agricultural needs, like a farmhouse or storage. If there are no possibilities on the farmland to build anything, then the value will suffer. It is therefore essential to find out about the potential use of agricultural land when setting the selling price. You can find this information in the allocation plan and cadastral plan provided by your commune.

## Is it possible to estimate the price of farmland yourself?

### Valuation of agricultural land using the average market price

The average market price is calculated on the basis of third party sales prices in the same region over the last 5 years. This average price is defined each year by the rural economy department. You can then use this average price to calculate your selling price, also known as the "legal price" when it respects the maximum price allowed in your region for agricultural land. This legal price is by definition 1.05 times higher than the average market price".

### Valuation of farmland by analysing similar land on the market

Using the market price is a quick and easy way to make an appraisal of your agricultural land, but it does not take into account all the particularities of your land. To adjust the price of your land, you can compare it to similar properties currently for sale in your area. For example, if the nature of your land requires tilling the soil in order to farm it, it will be much less valuable than lands that are ready to farm.

It is important to note that when adjusting your sale price, it must never exceed the maximum authorized price (set by the LDFR) by more than 5%.

## Have an expert appraise an agricultural lot?

Due to the complexity of the task, it can be useful and more effective to have a professional estimate of your farmland. The expert goes to the land in question and assesses its real value based on its condition and fertility and will be able to set a price based on the yield value.

The agricultural yield value corresponds to the capital whose interest (annuity), calculated at the average applicable rate over several years, corresponds to the income from a business or an agricultural property operated according to the customs of the country. Since the yield value is calculated uniformly throughout Switzerland, there is a guideline for estimating the yield value available in the Ordinance on Rural Land Law.

Thomas Miller
Thomas Miller has been a real estate agent for over 4 years now, when he is not in the field, he is dedicated to his second passion, writing, especially in the real estate market.
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