Land Investments for Long Term Capital Growth


Long Term Capital GrowthA study of investments with potential for long term capital growth highlights that land investments in the UK have resulted in substantial growth rates with a low risk factor. Overall farmland prices show tremendous increase, which makes it an attractive investment alternative. Farmland prices have increased by up to 30% in the last 12 months, and 130% since the early 1990s with an average 920% growth in the last 20 years.

A Shift in Priorities
Previously, prospective investors seeking long-term capital growth used to invest in mutual funds, investment trust, stocks, equities, and hedge funds. However, there seems to be a shift in their priorities. Land investments clearly show better average growth with less downside volatility. Previously only large institutional investors used to invest in land. Now, this exciting market is open to small investors too.

The study of the supply and demand equation indicates high prospects for land investments. Let us equate land in respect to population explosion. It is very clear that demand for land is much more than supply. Land prices are shooting up. So, it is clear why land has great investment potential.

Let us look at the reasons behind why UK is a more attractive place to invest in, when compared to other countries of the world, for real estate investments:

1. Population Influx - In 1981, the population in the UK was 56.2 million. It rose to 58.8 million in 2001, an increase of about 2.6 million residents in 20 years. And it is still increasing!

2. Immigration – The government of UK grants entry to over 170,000 people per year, which accounts to over 60% of the annual population growth. Within the next 20 years, therefore; at current rates of growth, the UK can expect to bring in at least an additional 3.4 million inhabitants.

3. Social Trends – The number of divorced couples have increased from 148,500 in 1980 to 200,000 in 1980; a rise at the rate of 30%. Couples who were staying together will now be looking for separate accommodation. More people are staying single by choice and tying the knot only later in life.

Here are some statistics given in a recent treasury report: The UK will need another 1.5 million homes, in the next 17 years. The requirement in the city of London alone will be around 300,000! This is vis-à-vis the population influx and lack of affordable housing in the present scenario.

The need of the hour is continuous and large scale housing development. Brown field sites or redeveloped areas are to be used for building these homes. This land is in short supply and is on the costlier side. Such large-scale construction will also necessitate development of a green belt throughout Britain.

Land Banking
What exactly is land banking? You start off by acquiring land in specific areas which is under development, with no planning consent. The planning consent is granted when urban expansion occurs and the land rises in value. You can expect a significant capital gain when the planning consent is granted. All these factors go hand-in-hand in making a land investment a risk free and high-gain long-term growth investment.

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