Investing In Land by Alvin Hall

Buying undeveloped land that can be built on is the new craze -and given the supply and demand equation in relation to the UK 's housing needs it is not difficult to see why.

Look around your home town and a pound to a penny says that you will find one property or another appearing on land that you would not have thought could contain such development.

Yet it is all the' rage as back gardens fall into the hands of developers and homes start to sprout up in the most unlikely of places. That means there is money to be made from owning land that has building potential and today land speculation is all the rage.

How often have you heard about substantial profits from buying land cheaply and obtaining residential planning consent? How often have you thought that the market is only available to developers and professional speculators?

Buying land for sale in Britain appears attractive during a period when property still seems to be the best and safest investment. But there are a number of factors that the investor new to the potential in self-build land needs to know about, even though investment land for sale has been considered by many to have performed well over the past few years.

The value of land has risen dramatically in recent years (almost 24 per cent last year), and with the current shortage of affordable housing, the value of self-build land development looks set to rise again. This, coupled with the fact that land is seen as a real investment and that the supply of self-build land cannot be manufactured out of nothing .shows why building plots of land for sale are viewed by many as an attractive investment opportunity.

Even so people buy land for different reasons. Some wish only to care for animals or use their land as a pony paddock; others take a long term investment perspective and hold on to their building plots of land for sale for many years, waiting for the value to appreciate. Many people also use their plot as self-build land to build their own ‘dream' home.

The Internet now allows land agents to market plots of self-build land for sale to the general public rather than just public bodies, farmers and the landed gentry as previously.

Because you are entering an unknown, a land agent can help with the buying process. To the man in the street, or even to those more experienced in financial matters, self-build land development is probably a foreign business. Many people are experienced in the purchase of new homes, and there is some overlap between this and the purchase of I and, but the re is also a great deal of territory between the two. As with any investment, there is an element of risk with investment land. And, of course, it Is about speculation and having an eye on the long game. The government has already said that to cope with the demand for housing In London green belt areas will need to be developed. The figures suggest 40 per cent development of Greenfield land and 60 per cent of Brownfieid sites.

The gamble here is that speculative land investment in plots without planning permission in areas of high housing need is done with the longer term view in mind and the hope and belief that planning permission will be granted in years to come.

So a cool head and a rational approach are vital.

Promoters of land often tell you: “You don't wait to land, you buy land and wait”

To this end there is a lot of activity from land agents particularly across South East England. They specialise in land for sales close to existing housing that has been identified as having good medium to long-term chance of gaining planning permission for residential housing.

Residential sized plots of land for sale are then offered to the public allowing them to share in possible future development gains and, with the dot com crash and the recent accounting scandals, the simplicity and transparency of investment in building plots for sale has gained many followers.

There are no complicated concepts that investors need to understand with land, just that there is an ever-increasing demand for building land for sale and a restricted supply of plots for sale.

The advantages are:

•  Land is real

•  Unlike shares land is tangible -it can be visited, seen and walked on.

•  There is a limited supply of land.

•  England is a small country with the majority of the population wanting to live in the South East.

•  It is easy to understand and seen as a solid investment.

•  Land is not open to accounting scandals and it is clear when property prices are going up (or down) and the reason for this movement.

•  It is a cheap way to invest in property

•  A semi-detached house in the South East of England can easily cost £250,000. A residential-sized plot of land in the South East of England, close to existing residential homes, can be bought from around £15,000.

Land increases in value in two ways

•  By increasing property values (due to demand outstripping supply).

•  By land gaining permission to have houses built on it.

For example, a £15,000 plot of land in the South East that gains planning permission to build a four bedroomed detached house on would then be worth in the region of £200,000 to a builder wanting to put a £600,000 house on the land.

It is, therefore, easy to see why land speculation is the new Klondike . The potential returns outstrip any other investment by miles. But like all these ‘too good to be true' deals you need to approach the business with a cool head.

Ten years ago land sales were effectively a closed shop. Land Agents generally only catered for developers, builders, farmers and the landed gentry. If you didn't know the jargon or where to look or have the right background, then you did not have access to land for sale.

The main reason for this was purely economic. The 3% margin earned by the land agent was low, so they didn't necessarily want to spend the time explaining the intricacies of “claw backs” to a raw land-buying' recruit. Additionally, they didn't want to upset their land owning customers by recommending they sell their land to a novice private individual who had a high chance of pulling out of the deal. It was far easier and safer for the Land Agent to work with a “known” buyer, who knew all about buying land for sale and was unlikely to withdraw from a deal.

With the “dot com” bust and the recent accounting frauds (Enron, WorldCom etc) many investors have abandoned shares as a form of investment and are turning to property.

There are several types of investment, but investing in UK land is quickly gaining mass appeal. This is essentially because of the fantastic gains made on land sales by some investors over the last 10 years.

Buying land is now also more accessible due to the entrance of new land agents onto the market, in acreages tailored to the needs of the public rather than the needs of the farmers.

At Home with Alvin Hall. 2004.

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