Buying land has been a lucrative investment for many people over the years, one which can jump significantly in value in a relatively short space of time. When you bear in mind the chronic shortage of housing across the UK there is no doubt that suitable land upon which homes can be built will be much sought after. So, what are the pros and cons of buying land?
Dead money
It may seem strange to start this article with what many may see as the downside to buying land but this is the first thing you need to appreciate. If you are buying land with no housing or storage facilities then in effect your money is likely to be non-income earning. In theory, as the years goes by inflation will eat into the real value of your property (assuming there is no market movement) but as we have seen things can change very quickly. However, initially when looking to buy land as a long-term investment you need to appreciate it is not likely to create any income for you.
Planning permission is the key
Planning permission for residential or business accommodation is to all intents and purposes the key to buying land and creating a profit. In years gone by we have seen the massive increase in the value of land after planning permission has been approved. This process can sometimes drag on although where similar planning permission has been approved in the area it could be quite a short process. Carrying on from the planning permission angle, it is obvious that you need to buy land in an area which will at some point in the future have demand for housing and is likely to gain planning permission. This is where the risk starts to creep in!
Develop or resale
Once planning permission has been approved on your land then you will likely see a significant increase in its value. This then prompt the question, do you self-build and sell on for a larger profit or do you sell the land with planning permission for a smaller profit. This all comes down to risk and reward because who knows what may happen in the future, will you have enough money to finish the project, will there be any buyers will the market turn down. It is therefore worthwhile balancing up the probably significant additional investment required to build on your land, and then resell, against a simple resale of the land with the valuable planning permission.
A growing population
Assuming that you acquire land at the right price in an area which will at some point see more demand for accommodation, whether business or residential, the growing population argument will kick in. Despite the fact that the UK is on the verge of leaving the European Union there will still be significant immigration for many years to come. When you also take into account natural growth in the UK population, and changing trends such as growing demand for single person accommodation, this will eventually filter through to increased demand for accommodation.
Summary
Assuming you buy land in the right area at the right price there is every chance you could obtain planning permission for accommodation in the future. Until there is a change in this area the value of the land may remain fairly static so your money could be dead money in the short, medium or longer term. However, once you are able to obtain planning permission then have the decision as to whether to self-build or resell the land with planning permission, and hopefully a significant return. Land is a static asset which will remain constant so as the population grows and demand for accommodation follow suit, land will become much more sought-after and more valuable.