Land banking, over the longer term, has shown better average gains than either shares or property, and with less downside risk, with an average UK growth of 920% in 20 years!
Once the preserve of rich, today, even smaller, in the know investors are taking advantage of this opportunity to make substantial capital gains.
Land Banking – What is it? Land banking simply involves the acquisition of land, which does not enjoy planning consent, in advance of expanding urbanization.
With the granting of planning consent, the price of an open space parcel, not yet subject to urban development pressures, normally rises in value.
Land Banking in the UK In 2004 alone, agricultural land in the UK appreciated in value between 16% and 30%, depending upon its geographical location.
In fact, over the past 20 years, the AVERAGE increase in UK Land has been a staggering 920%! In many instances, investors who have bought land in the right place at the right time have exceeded these average gains.
Not only has land risen in value dramatically, it has risen in a smoother upward path with less downside volatility than either stocks or property.
UK Demand Exceeding Supply The UK is one of the most densely populated countries in Europe and has a rising population driven by a huge influx of migrants from overseas.
Two facts will illustrate the potential of land banking in the UK:
There is a need for up to 3,500,000 new homes over the next 15 years, rising to 4,400,000 new homes over the next 20 years.
Over the last 30 years, the demand for new homes has increased by 30%. In the same period, house-building rates have dropped by over 50%.
Supply must catch up with demand, and buying land in the UK therefore offers investors a great opportunity to make substantial capital gains.
Location is the Key! Under developed land, such as Greenbelt, agricultural and forestry, is cheaper than land that currently enjoys planning consent. The way to make big capital gains in land banking, involves buying land in specific areas in the hope of future development.
Pre-planning purchase of green belt, agricultural and forestry land is nothing new. Astute investors have been doing it for years.
Investors simply need to study specific areas for the likelihood of future planning permission being granted, which will lead to an increase in the value of the plot purchased.
How to Make Big Land Banking Capital Gains Every developer knows that each town and city must grow outward, and the land most available is agricultural, greenbelt and forestry.
Land without planning permission which is subsequently included in a local authority’s unitary development plan (UDP), will potentially benefit from a significant increase in value.
With the granting of a change of use, a site’s value can increase substantially. However, the change of use category granted, i.e. residential, commercial recreational etc, will ultimately dictate the change in value of the plot.
Land Banking Risks Any investor considering land banking needs to give careful consideration to site selection, and purchase sites which are within the path of progress and future urbanization, but also have a high probability of future development.
Land Banking is a long-term investment, as resale durations and amounts are variable.
Taking Advantage of the Land Banking Opportunity There are many specialist companies catering for international investors wishing to own UK land. An investment in land can be cheap, as many developers buy plots, divide them, and sell them in smaller parcels.