The previous chapter revealed how the world’s elite amassed their fortunes through investments in land. We discussed the various conventional investment mediums, their potential returns and their investment timeframes. With all these investment channels available to us, have you as an investor considered how long it will take to multiply your investment by 1,566% and whether it is even remotely possible through conventional investment channels?

In the closing paragraphs of the previous chapter, we exposed the facts about massive shortages of land and residential properties in the UK not to mention the proposed 3 million homes that are expected to be built by the year 2020. Land is fast becoming a priceless commodity and because there is more demand than supply, land banking is perhaps the most profitable investment medium available today.

And so you ask, what is land banking? Land banking is an ingenious concept that isn’t new to astute investors. It is a time-proven concept that has created billionaires the world over throughout decades. Ironically, we have all heard of it at some point or another yet some of us may have just a grainy idea of what land banking is about. For many decades, property developers and market speculators are known to stock up large plots of land as they had foreseen the potential worldwide. These stocked up plots are usually agricultural or barren land which at that point of time is viewed as unprofitable.

How did the concept of land banking come about? Land banking requires superior foresight, risk tolerance and experience. Usually, established developers speculate and take calculated risks of purchasing and stockpiling land that they believe will one day, possibly in 10 or 20 years later, become part of a valuable residential, recreational or commercial nucleus. Hence, they invest and buy these plots at very low prices due to the unforeseeable future potential it holds.

More often than not, these land plots end up being part of a bustling township or adjacent to locations with planning consent of the town planners. Thereon, the value of the land increases tremendously and is then sold for a substantial profit. In the UK, an investment return of land banking is dependant on the approval of the Land Usage Concept Plan which determines the plot’s status. Approvals are hard to come by and are very time-consuming, sometimes spanning over 20 years in certain countries. Nevertheless, with the support of a trustworthy and experienced land acquisition and site development company who is able to select the right piece of land situated in a prime location, the planning permissions for these plots may take a much lesser time span to obtain, i.e. 5 – 7 years.

In comparison to other forms of real estate, land banking costs much less to invest in. As an example, a semi-detached house in the South East of England can easily cost £250,000 while a residential-sized plot close to existing residential homes costs around £15,000. It also does not require further capital infusion other than the purchase price as all you need to do is just fence up the entire site. Furthermore, there is little or no maintenance required by the plot owners if the land purchased is well selected with no history of flooding , near existing developments and infrastructure with existing road access and so on.

How is land banking a lucrative investment vehicle? Land banking is a superb investment vehicle because it is a relatively recent concept for the public. In the years before, there had been no easy way for the public to buy land due to the complicated and tedious processes involved. Investment land is usually located in areas where there is housing shortage that has not gained planning permission yet and land without planning permission is around 1/10th the cost of land with planning permission. Now that you have a clear idea of what land banking is and the potential of investing in land banking, keep a lookout on the coming chapter where we will disclose more exciting information on why this could be the investment vehicle for you.

Highlights of the coming issue

Land Banking – the First Stage of Real Estate Development Process
The history and forecasts of Land Prices in and around London
What Land International does…
Why buy land in England?

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