Land, A Booming Market
Previously only the landed gentry and large property developers invested in land, but in recent years investment in land has become increasingly popular for everyone from the first time investor to seasoned professionals who previously would have invested in property in the UK or abroad.
The reason for this is simply that land values seem to be outstripping other investment values at every turn. PropertySpy.com have reported that between 1986 and 2006 residential property values rose by 469%, when in the same period residential land values rose by 764%, almost twice as much. UK Land Investments Group takes a different perspective, saying that in the last 10 years land values have risen by an astounding 370% when the FTSE 100 has only risen by 51%. Whatever way you look at it land seems to be an excellent investment vehicle for the medium to long term investor.
So why are we seeing such big increases in the value of land? Well, to start off with there is a fixed amount of land. The UK is not getting any bigger so supply is limited. Demand on the other hand is on the way up: a rising population, increased immigration and rising rates of divorce mean that many more properties will need to be built, 70,000 more a year according to one Government HomeBuy Agency. Some of this will be built in existing urban areas but there is increasing pressure for cities and towns to expand outward into greenbelt land.
Greenbelt land is land that has been designated as protected from development. Many cities and towns are surrounded by greenbelt land to prevent the unrestricted sprawl of these urban areas, to prevent neighbouring towns from merging and loosing their identity, to preserve the character of some historical towns, and to assist in urban regeneration by forcing the re-use of derelict urban land and property.
To buy land in urban areas is extremely expensive and in the main still the domain of the major property developers. Most land investment takes place within greenbelt land or farmland that currently does not have planning permission, but is expected to at some point in the future. Investing in land with no planning permission is far cheaper but is a gamble. This gamble can however be a calculated one, and if you do your research correctly can be a very profitable one as well as it is reported that land values could increase as much as tenfold when such permission is approved.
Things that affect the value of land: Location, location, location is just as important for land as it is for property, possibly more so as it can be all the more unpredictable. Topography (the physical make up of the land, hills, valleys, etc. as well as vegetation and gradient) will effect the value of land. Is the land stable (all land will have been used before, the question is what for? has it been mined, has it been filled, is it on a flood plain). The closer the land is to villages and towns the higher its value will be. To have direct access to roads or rights of way to those roads is important to the value. Drainage and existing structures and services effect the value of the land (running water or electricity or even small outbuildings can increase the value of land). Being next to an area that has already been given planning permission is another great boost to land value.
With an increasing demand for new housing, the Government's promises to satisfy this demand and the cost of buying or building in existing towns and cities the pressure is on to re-classify some areas of Greenfield land so it is easier to apply for planning permission on them. Research your location thoroughly before you consider buying land, what has it been used for previously, has any land nearby been given planning permission and is your plot in a similar position and state? What has been the historical expansion of the towns and cities near to the plot you are considering?
Along with the increased interest in land investment there has also been a surge in the number of organisations looking to sell you land. Be wary. Just like any industry that grows rapidly the controls are not as strict as they could be and it is important that you choose an organisation that will represent you and themselves honestly and professionally. There are plenty of companies out there that will claim that they can guarantee planning permission (nobody can do this unless they have a very efficient crystal ball), or short term gains on your investment, but you have to be realistic about this. Land Investing is just like any other kind of investment, it takes skill, knowledge and a little luck to make it pay, and you should therefore use a Land Banking firm that takes a medium to long term perspective on your investment, makes you no outrageous promises, and meets its targets and obligations. There are a few out there, but it is also important that you go with your gut and select a company you feel comfortable with.
UK Land Investment Group is trying very hard to promote its professionalism. They talk openly of working with their links in politics to bring more legislation into the land industry to ensure that all those in the sector act professionally and with their clients in mind, and to drive out those who are being unscrupulous or offering wildly inaccurate claims of returns that sully the industry's name. The role of firms like the UK Land Investment Group is to do all the research for you (not to say that you should leave it all up to them, it is always sensible to do your own research into anything you buy), to make buying land cheap and simple for anyone even if you have no investment experience yet. The interesting difference between them and many other firms is that they don't just buy the land and sell it on, they retain a large percentage themselves so they share the risk with you and can continue to monitor progress towards planning potential and to put their weight behind lobbying for changes in classification of the land to your financial advantage. UK Land Investment Group is just one of many land firms you could choose to work with, and it is important you do enough research to feel comfortable with the organisation you choose, and do carefully scrutinise the terms of any firm offering you investment advice and assistance.
