Land vs cash: what is the most valuable?

[rickyrickygrimes]

My parents own half a farm, previously the farm that my dad grew up on. He left because my aunt, his older sister, took over running the farm (into the ground) with her husband.

Over the years various parts have been sold off for building, which has been very profitable for my parents though nothing has been sold for a long time. For various reasons, it looks like there might be an opportunity to sell more soon and at a great price.

My dad though, has totally changed his mind about selling! He keeps saying very dramatic things like ‘you never know when you will need somewhere to go, a bit of land, for yourself’ and that it’s far more valuable then any amount of money (and we are talking a lot money). He has also made clear that he expects my sister and I - assuming we inherit it - to never sell it 🤷‍♀️ My dad has become quite pessimistic about the state of the world as he’s got older, and a bit more maudlin and I’m sure he has an emotional attachment to the place that my sister and I don’t share.

To be clear, my sister and I have no interest at all in farming the land. We don’t get on with or even really know the cousins that we would end up sharing ownership with. Neither of us live anywhere near and have no interest living in or near it.

So who’s right? would we regret selling it ? Is there some rule that land is always more valuable?

Well, Governments are always printing more money but no one is making any new farm land...so...land is very likely to be a better investment in the long term than cash.

Then you should consider the fact that the FTSE has averaged around 5% growth a year over 100 years, whereas land has averaged just under 6%...

But, if you have no interest in farming or the area and would rather have the capital, and aren't bothered by the (current) tax efficiency of holding farmland (subject to few conditions) then take the money and run!!

Well from your point of view if your dad sells up now he may well just fritter the cash.

If you inherit the retained land there's no inheritance tax to pay currently and you could cash it in then.

That said planning policies change and land worth £1m+ for building now could end up locked in greenbelt down the line and only worth a fraction of its development value.

Also there may be none left after potential care costs.

The value of land depends very much on what you're allowed to do with it. Development land is vastly more valuable. If you say various bits have already been sold off for building, then it's possible that cheap farming land can be transformed into a valuable asset (e.g. if it goes into the local plan).

We are in a similar situation, and my dad is deliberately not applying for change of use or planning permission for now, because he wants to keep the value of the land low for us to inherit (lower IHT, of course). But he hopes that we will maximise the asset after he's gone! Similarly, some of our land has been developed already, so we know it's possible. The alternative to selling would be to develop/build on it ourselves, but it's nowhere we'd want to live, and it's not something we would embark on ourselves, so we'd give a developer that privilege.

Land is often a very "long game".

If it was just my sister and I who would own It, keeping it might work, but we have three cousins we barely know who would end up co-owning 50%. It’s not an asset that can be physically spilt and I have no idea what their expectations are. They are ‘on site’ so to speak: my aunt lives in the falling down farmhouse, they all grew up there and still live locally though none of them have taken on the farm from my aunt. It’s currently just falling apart around her ears. But I’ve no idea how they feel about it. My dad and his sister fell out years ago and have barely spoken since 🤷‍♀️

so it feel like a total can of worms to me, and my instinct (and my sisters) is that we really don’t need this drama ongoing.

The land already has planning permission. A local builder has had an option on it for 25 years: it comes to an end next summer at which point the value of the land will likely double. We are all going to have to sit down with the other owners and decide what to do next 😱🤦‍♀️ I’m dreading it tbh and it’s already giving my dad sleepless nights - but he still is determined to hang onto it 🤷‍♀️