Now May Be the Golden Moment for UK Land Investments
Key economic factors including population growth, a housing shortage and a recovering economy can lead to rapid land asset value growth.
Almost everyone in the UK with assets to invest has some experience of buying built property. Whether in London or Manchester or Cardiff, the suburbs or the countryside, we are familiar with how to price comparable residential properties, how to estimate what needs to be spent to upgrade the property and what growth potential exists in a particular home and its surrounding neighbourhood. But when it comes to purchasing undeveloped land as an investment, much of this experience does not apply. There is a whole different set of variables that make it a different and, arguably, more challenging acquisition/investment.
That said, it is a good time to invest in undeveloped strategic land. Several factors combine for a “perfect storm” of advantages to the land investor. They are:
- When land values are in a trough – There has been a great deal of loss in the global recession that began in 2007. But from every down comes an up, in this case the depressed prices of much all real estate necessarily precludes a future recovery.
- The protracted nature of this recession – While each investor acts according to wherewithal, objectives and opportunities, the economic downturn has altered how investors think. Most are dissatisfied with the volatility of market-traded securities (stocks and bonds), such that many have migrated to alternative investments. Those who opt for land either have a honed acumen for real property or they work with property funds that are professionally managed.
- When demand for land development is high – There can be any number of factors that drive a value increase in any particular property. But the key driver in the current economy is population and a shortage of housing. Companies looking to establish operations have to consider the available labour pool; in some municipalities there may be an actual shortage of human resources due to a dearth of appropriately-priced residences. These municipalities welcome development and are more inclined to change the land designation to residential and commercial from other uses, such as agriculture.
- Where special regional factors can create particularly strong investment opportunities – The scenario for the housing-worker equation is different from, say, what is available in London versus towns in the southwest, in Wales and the Midlands.
The importance of working with professionals in making an investment in land cannot be overstated. Undeveloped land is a specialized area that offers great opportunities through land site assembly, but an individual investor is strongly advised to speak first with a qualified personal financial consultant to understand the options, risks and rewards.