Land Investment, Building Plots & Investing in Land for Profit
                     Land Investment, Building Plots & Investing in 
Land for Profit
Over the past few years both the UK residential and 
commercial property investment markets have 
fluctuated significantly, at times struggling to maintain 
capital values and investment returns. You might 
therefore be led to believe that now is also a poor time 
to acquire land investment opportunities and building 
plots for development… but not a bit of it.
UK Residential Land Market
Consider the following facts… let’s take the UK residential land 
market first.
In the UK the residential land market is primarily affected by 
demand from house-builders and property developers which in 
turn, is linked very closely to the strength of the housing 
market itself.
Generally, there are relatively few development land 
opportunities available on the open market at any one time, 
and therefore a single house-building company desperate to 
acquire good building land can push-up the price for such 
sites much higher than normal… a simple supply versus 
demand situation.
Optimising Investment Land Values
Getting the timing right to optimise land 
investment values is vital, but the 
groundwork needs to be completed well 
beforehand and all consents ready and in-
place as the market begins to reach its 
peak.
All this means starting the land value 
enhancement process when the demand 
for investment land is at a low point, and 
this is usually when the best land 
acquisition deals can be done.
Land Investment Opportunities
While it is true to say fewer homes are currently being constructed the future 
demand is significant with a large under supply of new homes already 
causing problems.
Because of growing demand for land that is capable of being built on house-
builders and property developers will at some point be forced to purchase 
even more land with an allocation or preferably with a planning consent 
already in-place.
You see, the major UK house-builders have traditionally built-up their stocks 
of building land (often called a strategic landbank) which helps to cushion 
them against the time it takes to buy building plots and development land 
and then obtain the necessary planning permissions for new homes.
Over the last few years UK house-builders have typically reduced their land 
acquisition activities and so have not bought as many new development 
sites, tending instead to use up their strategic land stocks.
It is not rocket science to deduce from this scenario that there will eventually 
come a time when their land reserves reach a critically low point.
At this point they will then be forced to buy more development land on which 
to build houses.
And if you own the types of land that they want, then you are in pole position 
when it comes to securing the best values for your investment land.
Greenfield Land
Then there is the greenfield land to consider.
Greenfield land needs to be correctly promoted and allocated for 
development purposes before it can be granted planning consent… that, 
again, takes time.
The amount of development land currently being promoted by the large UK 
house-builders and promotion companies is reducing, therefore leaving a gap 
in the future market.
Enhancing Land Investment Values
In any case, never loose sight of the fact that land is a tangible fixed asset… 
its value may vary but it rarely reaches zero, so it always has a base value.
The value of land can also be significantly enhanced by activities such as 
planning promotion, obtaining statutory consents (planning permissions) or 
acquiring complementary land interests.
As we have already discussed, house-builders and property developers will 
usually look to acquire development land with the benefit of planning 
consents although occasionally they will manage the planning processes 
themselves.
As with any investment, to get the best value from your land investment you 
should always be aware of the underlying land and property value cycles and 
look to sell your land when demand is strong.
Different Ways to Invest in Land
If all this leads you to believe that investing in land represents a good 
investment opportunity in the current economic climate you will no doubt 
want to turn your attention to the best ways of doing so.
There are a number of direct and indirect ways for investors to acquire 
investment land assets that should be carefully considered and they are:
• DIRECT LAND PURCHASE
Direct land investment purchase where land is acquired in the traditional 
sense of ownership.
•COMPANY OR CONSORTIUM
Indirect land acquisition, where the investor purchases a share within a 
formally structured company or consortium owning one or more land 
interests.
• SPECIAL PURPOSE VEHICLE
Indirect land acquisition, where the investor purchases a share within a 
Special Purpose Vehicle (SPV) investing in one or more land interests.
Additionally, there are other routes to land ownership and each has its advantages and 
disadvantages for an investor and you will need to consider them very carefully before 
proceeding to buy.
Investment Land Considerations
Your own judgement is also called for when it comes to the detail of 
any investment land deal.
Your access to sources of capital, approach to risk and investment 
strategy will all impact your decision making processes.It is often 
very useful to ask yourself the following questions:
• HOW MUCH?
How much are you prepared to invest in land? Or, better still, how 
much can you honestly afford?
• INVESTMENT RISK?
How much investment risk are you prepared to take, bearing in mind 
that the greater the risk, the greater in all probability will be the 
reward?
• HOW LONG?
What sort of time-scale are you contemplating, working on the 
assumption that when considering land investments, short-term is 1-
4 years; medium term around 5-8 years and a long term is anything 
in excess of that?
Making the Most of Land Value 
Cycles
While the UK investment land market is fairly fragmented 
and can be quite complicated to understand, the essential 
point on which to focus is the fact that once land has 
been allocated for development the owner of that land 
can decide the time-table for turning it into a consent to 
optimise their position in the property value cycle.
As it takes time for land to be allocated and planning 
consent to be granted the best time to begin the value 
optimisation process is near, or at the bottom of the 
property value cycle.
In other words, when property values are low or 
stagnating.
So, particularly if it is part of a balanced property 
investment portfolio, it is certainly worthwhile giving 
some thought to investing in development land as an 
investment opportunity.
Expert Land Investment Solutions
As leading independent land and property 
investment specialists Investment 
Property Partners offer expert advice 
and support to clients across our specialist 
areas of expertise helping them to achieve 
their investment objectives.
If you are a property developer or investor 
looking at land investments or 
development opportunities please contact 
our property experts today to discuss 
how Investment Property Partners can 
help you.