What is the Value of Infrastructure?

From the valuer – Gina Duncan

When we refer to ‘improvement value’, we’re talking about the added value that improvements contribute to the land.

This distinction is important, as the valuation formula is not land value + improvement value = capital value, but rather capital value – land value = improvement value. This added value is ultimately market-driven and is closely tied to the farm’s functionality, and can be heavily influenced by factors such as location and demand.

As both a valuer and a farmer, I’m well aware that ageing infrastructure often presents a contingent liability. Common examples include unlined effluent ponds, old cowsheds, and dated dwellings. That said, sales analysis shows that ageing infrastructure can still hold considerable value because, as we all know, an older cowshed can produce just as much milk as a modern shed. While old infrastructure may reduce a farm’s value, in some cases it is assigned little or ‘no added value’. 

I frequently come across buildings that, in reality, should be treated as having a negative value due to the significant cost of demolition and material disposal, but are simply added into the valuation at ‘no added value’.

On the flip side, sales analysis also shows that the added value of brand-new infrastructure often does not match its build cost, meaning the investment may not be fully reflected in the property’s value.

In a soft market, farms with ageing infrastructure tend to be less saleable than well-developed farms. While this can benefit you as the purchaser, should you come to sell, this will now potentially become your challenge.

“I frequently come across buildings that, in reality, should be treated as having a negative value due to the significant cost of demolition and material disposal but are simply added into the valuation at no added value.” – Gina Duncan, Darragh Valuations

The non-financial benefits of modern infrastructure can’t be overlooked, particularly when it comes to attracting and retaining staff. In more remote areas, it’s easy to overcapitalise because improvements tend to add less value. But staffing is often the biggest challenge on remote farms, and infrastructure can play a major role in making a position more appealing.

How you weigh up the decision to purchase a farm with ageing infrastructure can depend on how you run your business. Are you planning to be an owner-operator, or will you rely on staff? If you’re doing it yourself, you might choose to live with the inconvenience of older infrastructure and workarounds. But if staff are involved, it’s hard to expect them to deal with the inconveniences in the same way you would.

Overall market trends generally indicate that, all things being equal, it would be preferable to buy a farm with more modern infrastructure rather than face the cost of a new build or upgrade. However, ageing infrastructure still adds value and provides a market for entry-level buyers. Infrastructure can always be upgraded over time, what you can’t change are location, soils or contour – and as the saying goes, “Buy land, they’re not making any more.”

From the banker – Aidan Gent

On-farm infrastructure is a larger topic of conversation now compared to what it might have been five or 10 years ago and we are starting to see infrastructure driving purchasing decisions with the top farm sales this year being driven by good soils and good infrastructure.

I think it should be as much of a conversation for those who are looking to potentially exit the industry as it is a conversation for those that are looking to grow within the industry. It’s not window dressing. It’s actually going to the core of what running a good farming business looks like.

We have been seeing farms that might need a new farm dairy or improved staff housing, selling at a bit of a discount to those premium properties with top infrastructure. Good staff tend to follow good infrastructure. Big farms are now big businesses. That means they need modern systems, good people, and good infrastructure to match.

The conversation is changing and so are the expectations. Whether through targeted refits, complete rebuilds, or thoughtful technology integration, infrastructure is no longer just about keeping the wheels turning. A farm’s infrastructure is a fundamental driver of its operational efficiency and long-term sustainability.

A well-maintained farm with top-tier infrastructure is more likely to run smoothly, leading to higher productivity, better environmental performance, and, ultimately, a stronger sale price. If each year you’re spending more on repairs and maintenance, eventually, the maths starts tipping in favour of a proper reinvestment.

What makes a farm easy or hard to sell, is what makes a farm easy or hard to run. The drivers of a good sale price are the same drivers of well-run business; good-quality infrastructure, with the right technology supporting it, underpinned by good operational performance and good environmental performance.

Having a good farming system is also critical in terms of the ability to scale a business.

If you don’t have good infrastructure, it’s very hard to have a repeatable system that can scale across a number of farms.

Depreciation of infrastructure when it comes to technology is also valued differently. As farms become more sophisticated and technology gets more embedded, depreciation becomes more real. The technology does have a useful life and there is a point where you need to reinvest.

We are seeing a lot more of the bells and whistles going into dairy sheds and each of those different bells and whistles has a very different depreciation outlook.