Land Investment UK
It used to be said in the UK that 'the streets are paved with gold', now it's more the case the fields are where the gold lies. Investing in land is increasingly popular amongst investors at all levels: English land is one of the most sought-after for development purposes, so UK land attracts substantial land investment capital.
There, are of course, a number of companies from whom you can procure investment land, and a choice of areas to focus your land investment. Indeed, the proliferation of companies offering UK land investments indicates a rapidly growing industry. While UK land usually represents a fundamentally sound land investment, investing in land still requires a considered approach.
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The rewards from land investment used to be reaped mainly by large development companies, farmers, and wealthy individuals..
Real estate investing is like value investing in stocks and you want to purchase the real estate during a period of a real estate slump. The reason for this is so that you can get a huge capital appreciation when the real estate market heats up again. Spending time doing real estate valuation is critical since if you cannot satisfy yourself on the maths that is a viable proposition, there is no way that your real estate investment would be a good one.
The History of Land Investment
Land Investment is not a new phenomenon. Significant wealth has been created through Land Investment by individuals who understood the concept of buying and holding investment land in the path of growth.
Investing in land is well established in America, and is a fast growing industry as a result of the housing boom in recent years. Land Investment is now becoming popular in the UK. English land presents considerable opportunities to generate returns, most obviously in residential development but also in commercial and industrial developments. The challenge now-and it was ever thus-lies in sourcing good quality investment land.
UK Land Investment has historically been the preserve of high net worth individuals, financial institutions and land professionals. For these groups the acquisition of agricultural and green belt investment land is a well-practised art. But it is not just these groups who amass UK land ahead of development - supermarkets and other retailers also buy and hold English land in anticipation of its higher future value.
Moreover, the powerful 20th century controls on UK land development - most notably, green belt restrictions - have created a 21st century housing crisis. Whilst some say that the preservation of large tracts of agricultural English land is paramount, others point to the economic and political damage that a widespread and prolonged housing crisis causes.
Recent history shows that investing in land is as attractive to the private investor as it is to the large scale developer or financial institution. However, an appreciation of the changing nature of UK land planning and development is important in land investment.
The planning and development process (which is where the value creation lies investing in land) is commonly described as being lots of small steps, then a giant leap to attain re-allocation or 'change of use'. Throughout the history of UK land investment, the groups and individuals who have profited most from English land have understood this key land investment principle.
Property itself remains a popular UK investment although much of the opportunity for capital growth in this cycle would appear to have passed. However, UK land investments, whilst rarely providing yield, can offer very substantial capital growth in the medium term.
With the emergence of companies offering managed UK land Investment, and the strength of the UK property market, the opportunity to participate in strategic land investment has never been greater. A balanced portfolio of UK investments commonly now contains a portion of UK land.
With the changing planning framework, an existing housing shortfall, and political pressure to build many new homes during the next decade and beyond, UK land is now a compelling proposition for all value-hungry investors.
History has been generous with those who have focused their resources on land investment. All the fundamentals (i.e. social patterns and economic trends) as well as anecdotal evidence suggest land investment will be just as lucrative in the future for the canny investor as it has been in the past.
The UK population is growing quickly. There's also a change in the nature of households - smaller families, more single occupancy. Speaking to the Institute of Public Policy Research, Gordon Brown's Housing Minister, Yvette Cooper MP, expressed it simply...
“The population is growing, the economy is growing, the demand for new workers is growing, and household formation is changing with an aging society and family break-up. The demand for housing is increasing.”
The result is a massive pent-up demand for new housing. What shape and form that housing takes doesn't matter to land owners. Whether developers want to build executive houses or affordable flats for key workers, land is still needed for new homes.
With the way that towns and villages have grown, there is often undeveloped land among or adjacent to existing homes. This is the land that Scala is expert at discovering land for investment where development, within government and local authority-set parameters, is entirely sensible.
Decision process
You should decide to buy land by using the same two criteria as for any investment, reward and risk. What is the potential reward? How great is the potential risk.
How great is the potential reward?
Get it right and the rewards can be exceptional. Typically, when land is redesignated for development purposes its value dramatically increases. The percentage increase varies between plots and locations, but it would be reasonable to expect a very substantial return on investment if your land is rezoned for development purposes.
And what are the risks?
There is a risk that your land may not be re-zoned for development for quite a number of years or at all, in which case it would not experience a dramatic increase in value. In any event, you should treat it as a long-term investment and only invest funds which you can afford to have tied-up for ten years or more.
Even if your land is not re-zoned you would still own the land, and a report by Knight Frank suggests agricultural land increased in value by 27% in 2006, but you should be aware that the value of land (and any income from it) may go down as well as up and you may not get back the original amount you invested.
Although UK land investment has long attracted high net worth individuals and financial institutions, it now also features in many private investors' portfolios. It is the scale of capital growth in land investment which attracts both the new money and the old. And English land can provide very substantial land investment returns. However the returns from land investments differ from other investments insofar as they provide substantial capital growth rather than yield.
Lloyds & Co Land Investments (“Lloyds & Co Land Investments Ltd”) is not authorised or regulated by the Financial Services Authority or any other regulatory body. Lloyds & Co does not give investment advice or offer regulated investment products to the public. Lloyds & Co offers parcels of land for sale. Having sold the land, Lloyds & Co do not pursue re-zoning or planning permission and as such does not carry on any regulated activities under the Financial Services and Markets Act 2000. Neither Lloyds & Co nor any person connected with it will have any role in pursuing re-zoning or planning permission, either in respect of individual parcels of land or a site as a whole, as a way of increasing the value of the land. Lloyds & Co gives no guarantees that land will in the future be re-zoned for development purposes or that planning permission will be granted. The value of land and any income from it may go down as well as up and you may not get back the original amount invested. Past performance is not a guide to the future.