When looking at investments for long-term capital growth potential, investments in UK land have returned stunning rates of growth coupled with low risk.
Overall prices (farmland) 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.
An Attractive Alternative Investment
When looking at investments for long-term capital growth most investors consider mutual funds, investment trusts, stocks, equities, and hedge funds. However, the fact is that land has shown better average growth with less downside volatility. This makes land a solid investment for the conservative risk conscious investor.
Once the preserve of large institutional investors, this exciting market is now open to smaller investors.
Why Land Has Such Great Potential
When looking at investments for long-term capital growth potential, we need to look at the supply and demand equation.
Land has all the ingredients for demand to exceed supply and see land prices climb higher in the coming years.
The Case for UK Land
When looking at investments for long-term capital growth potential, it is clear that of all the countries in the world to invest in land, the UK is one of the most attractive for the following reasons:
1. Rapid Population Growth – The population of the UK in 1981 was 56.2 million. In 2001, the population had increased by about 2.6 million to 58.8 million inhabitants.
2. Immigration – In terms of immigration, there is the granting of entry to the UK, of over 170,000 people per year. This constitutes over 60% of the annual population growth. Therefore, at current rates of growth the UK can expect to see at least an additional 3.4 million inhabitants within the next 20 years.
3. Social Trends – There is also a rising divorce rate in the UK. In 1980 and there were approximately 148,500 divorces throughout the UK In 2000 this figure climbed to nearly 200,000, an increase of over 30%. Furthermore, more people are staying single by choice and getting married later in life.
A recent treasury report stated that: In the next 17 years, with the rising population and increased lack of affordable housing, the UK will need another 1.5 million homes with 300,000 required in and around London alone.
Essentially, this means that there is a need for massive scale housing development in the UK at present and for the near future.
This will see land remain one of the most attractive investments for long term capital growth.
The Demand for UK Land
The building of much of this housing is to be on brown field sites, or redeveloped areas, this land is in short supply and is expensive to purchase and develop.
The priority to build new housing will necessitate the reclassification and development of green belt land throughout Britain.
Land Banking The Key to Long Term Capital Growth
Land banking simply involves the acquisition of land, which does not enjoy planning consent, in advance of expanding urbanization. When urban expansion occurs the land rises in value with the granting of planning consent.
The way to make big capital gains in land banking involves buying land in specific areas, in the hope of future development.
With the granting of planning permission, a significant capital gain is possible.
Land Investments for Long Term Capital Growth
Good past performance with low risk and the prospect of good future capital growth, makes investing in land for longer term growth an attractive option for all investors.