What do 'Investment Land' Companies do?
Investment land companies divide large acreages of land that has 'Hope Value' (long term chances of gaining planning permission) into plots so that they are affordable to the general public.
They offer land that is not presently considered as presently suitable for building on. If the land was presently considered suitable for building on they would be offering plots at £150,000 per plot rather than £15,000 per plot, pushing the value out of most individual's price range.
Plots that are already recognised by the council as having a good chance of gaining planning permission offer the public little investment opportunity, as the lands location potential has already been recognised by the authorities (which will be reflected in the lands high price).
To offer good investment potential to the public, the land investment companies look for land which councils presently dismiss but which, in say 10 years time (assuming the present housing crisis does not go away) they believe will need to be actively considered because of its location.
The investment land companies tend to go for land which was designated as 'Green Belt' 40 or so years ago, but which because of its location next to existing housing and public amenities, could lose its Green Belt status and be built on in the future.
The overnight increase in value on land that loses its Green Belt status is known in the industry as 'Planning Gain'. Planning Gains can be very large. It has been stated that the Chancellor Gordon Brown is presently looking into a new tax for these gains.
Should you buy 'Investment Land'?
When you buy Investment Land you are taking a gamble, just as investing in shares. It is a long term investment and you must not forget that "The value of your investment can fall as well as rise" - though you will always have your land.
As with houses, a lot of the price is allocated to the location of land. A detached house in Chelsea, London will be valued at many times the price of the identical detached house in a depressed Northern Town. The same is true of land in a rural location and land next to a housing estate in an area of high housing need.
Is land a Good Investment?
On one hand local council planning officials continue to assure us that the greenbelt will not be built on in their area. On the other house builders are openly targeting "scruffy" greenbelt (Barrett chief targets "scruffy" Green Belt - this is money.co.uk 29 Nov 2005) and the Government has admitted that an average of 2,400 acres of undeveloped green belt is being built on each year (The Telegraph. 11/06/2005).
The decision is yours.
As with all land investment, please take the following advice:
- 1. Always use a Solicitor when buying land. Some companies will say that it is not necessary but as Solicitor will be protecting your interests and you can guarantee that the people selling the land will be using a Solicitor.
- 2. With investment plots you have to predict where future housing will take place. Your overriding priority should be location, location, location. A field in the middle of nowhere has no chance of gaining planning permission even in the next 20 years. Always look for land next to existing residential development that has good amenities around it.
- 3. Guarantee of planning permission with next 3-5 years. If anyone promises you this, then please go and check the Local Council's Plan because any land with this kind of guarantee will already be designated for residential development. Any Greenfield land has to be redesigned first before it can get planning permission.
Feb 06
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