It will come as no surprise to those investing in land that achieving planning permission on a UK land site is where lies the most lucrative investment land returns, but there are other ways to make money from a land investment, writes Alex Way.
Where once English land ownership was the sole preserve of the Royal Family, the Lords of the Realm and sundry blue-blooded families, at the start of the 21st Century Britons lacking a traceable blood-line are increasingly buying land for either investment or commercial purposes. UK land ownership, whilst still concentrated in a small clique (the upper classes, property developers, farmers etc), is now in the national consciousness and is something to which many people aspire. This is unsurprising: ownership levels of property market assets in the UK have always been relatively high (vis-a-vis other northern European countries), and UK land values have soared in the last twenty years. Buying land in the UK is thus an eminently sensible activity.
As a very broad guide, UK land which is reclassified for residential development within the UK land planning framework rises tenfold in value (ie land with planning permission is worth ten times more than a similar piece of land without planning permission). As such few other assets have the same capital growth potential as investment land. That is not to say that the average land investment returns 1000% to investors since to achieve growth on that scale from buying land would require that you undertake the project from start to finish yourself. And many, if not most, people investing in land with a view to taking it through the land planning framework will need to employ somewhere down the line the services of UK land specialists, whose expertise does not necessarily come cheaply.
However it is entirely possible to achieve investment land returns of the order of 350-600% because land developers are opening-up their projects to private investors. The latter in effect provide partial land development funding to these firms in return for which those investors receive a pro rata proportion of the new value of the development land with planning permission. For the purposes of this article we will set to one side this fairly recent phenomenon (recent in the UK, at least - private land development finance is a well-established practice in the US), in order to consider other ways of profiting from investment land.
With a long-term outlook it is possible to make substantial land investment profits from buying land in the path of growth. Land planning expertise need not be 'mixed' with such investment land in order for its value to increase: the returns would be a function of the 'organic rise' in the investment land's value. However this is an extremely speculative form of investing in land, does not usually provide a yield, and as mentioned above is very much long-term in nature.
You may want to buy land in order to run a commercial enterprise: a caravan site for example, or for those with a more belligerent nature, to operate a paint-balling business. Some UK land owners buy land to lease it to firms requiring storage space: new fleets of cars for example. Still others have been buying land in order to exploit loopholes in the Common Agricultural Policy which give rise to EU subsidies for using UK land for farming/agricultural purposes. And finally, and perhaps least ethical of all (but entirely legal), is the practice of buying land which provides essential access to a new development: the owner of such access land can effectively hold the owner of the development land site 'to ransom' by demanding an exorbitant price to acquire the access land, which may only be a few square feet in size. Any competent property developer would however avoid such a scenario by ensuring they have full legal access to their development land site, but there remain some people who fall foul of this faintly dubious form of land investment.
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