Anyone who has had experience with property retail or property value would know that bodies of water increase the value of property. Whether it be oceans, lakes or rivers, water brings up the aesthetic value, and dollar value of any area. Due to the inherent beauty of things like waterfront sunsets, aquatic and avian life, and simply hearing the flow of water, property values on lakefronts are simply worth more to people than inland property. Through hedonic pricing techniques, Lansford and Jones conducted a study on the Highland Lakes in Texas which proved not only the increase in marginal value of waterfront (and surrounding) property, but identified key characteristics which create this price which can be applied to any property (Lansford and Jones, 1995). They especially focus on the composite factors that are not taken into consideration in the market.
Lansford and Jones have a well-developed list of factors in pricing including distance from major city, quality of construction, and sale price per square foot. Along with these general factors in property value, they added some others that regard lakefront and aesthetics such as waterfront, bluff location, scenic view, distance from lake, and waterfront footage. Using the generic variables as well as these lake related variables, they could conclude a few key things. Firstly, they discovered that the base premium for lakefront property is around $59,826 regardless of house size and location. Along with this they found some conclusive evidence regarding some other variables. They found that proximity plays a big role in pricing of property. Waterfront houses add the marginal value of around $1,248 per foot, this rate declines fairly rapidly but a property 150 feet from the lake still has the marginal value of around $32.59 per foot, and $3.17 at 3,000 feet.
As we know Lake Champlain has a very large amount of lake front property. Due to the stretched oblong shape of the lake, most properties have great view and a good amount of waterfront footage. Just looking into retail values of houses you can see the vast discrepancy in values of lakefront property and inland property. For example a 5,300 square foot house on the lake was on the market for $2,499,000 (Jenkins, 2010), whereas a 5,300 square foot inland house was on the market for well under half of that price, coming in at $1,095,000 (Ward, 2010). This is a very clear show of the increased value due to the aesthetic value of a lake. The mere presence of this body of water increases the property value (in this situation) by over 50%. This clear show of value must be considered when measuring the economic value of our lake.
Some of the results provided by Lansford and Jones can fairly easily be applied to Lake Champlain. Knowing this average marginal increase in square footage of lake property is $1,248 we can apply this to Lake Champlain’s waterfront area. The lake in its totality has 587 miles of waterfront (shoreline).
587 miles=3,099,360=30993.6 lots* x $1,248/ftsq/lot=$98 billion
As seen in the equation above the 587 miles of shoreline, which equals just over 3 million feet of lakefront, multiplied by the increased value of lakefront property (1,248/ftsq) is around 98 billion dollars in added value due to the lake. Currently, although not all of the lakefront is developed, nor is it desired, this measurement is merely considering the possible appraisal value of shoreline property due to the lake.
*Values calculated for an average house (2,550 square feet, 2 car garage, on a 100 foot lot)
Lansford, H. N., Jones, L. L. (July 1st, 1995). Marginal Price of Lake Recreation and Aesthetics. Journal of Agricultural and Applied Economics, Vol. 27, No. 01. http://ageconsearch.umn.edu/handle/15347.
Shelburne Vermont real estate (2010). Island Realty Inc. Retrieved on April 10, 2010 from http://www.lakechamplainrealestate.com/proddir/prod /12/5564
Meadowood Farm (2010). For Sale By Owner. Retrieved on April 10, 2010 from http://www.forsalebyowner.com/listing/7DC88