Scala Land Group - Land Investment
It’s a simple formula. When demand exceeds supply, prices go up. With three million new homes to be built in Britain before 2020 and with an increasing requirement to grow food, demand for land is increasing quickly. And supply? We’re not making land anymore, so supply is very tightly constrained.
Land comes in two colours, brown and green. Brownfield land has been built on before; greenfield never has been. There is a limited supply of brownfield – when a factory closes or a building becomes redundant then that land becomes available. Estimates by the Social Market Foundation show that there’s only enough brownfield land around to meet approximately 35% of our new housing needs. And, according to the National Farmers Union, only about 100,000 of agricultural green field land become available every year.
The situation – increasing demand, restricted supply – is right for prices to increase. And they have. Figures from estate agent Savills show that farmland prices rose by 37% in 2007.
How can a private individual benefit from investing in land? There are many ways to buy land, these are the two main routes:
- Most land is sold at auction – you can bid for it. But agricultural land tends to be offered in field or farm sized quantities. That means a major investment to acquire land, something which many retail investors are reluctant to commit to. And brown field land is often sold encumbered with buildings, and may be contaminated from whatever uses it was put to before being offered for sale. Not only will the investor need to find the buying price, but he or she will often have to fund clearance and remediation work.
- Alternatively, you can buy land, in house-sized plots, from Scala. This has the advantage that an expert has assessed the land, sub-divided it and made available affordable (from about £10,000) plots.
Land for agricultural use has been increasing in price in a steadily for several years – however there is another investment scenario to consider. Three million new homes by 2020 is the government’s housing target. Well over a million of these are likely to be built on greenfield land. If land is rezoned, its value jumps.
Scala selects, and offers for sale, investment land which meets the government’s residential sustainability criteria. We only offer land where there is an acknowledged requirement for additional housing, where the site is suitable for residential use and where there are no significant planning barriers to the site being rezoned. Only if the land comes through these examinations does Scala acquire it, before offering some to its clients.
We retain some of the land and seek, through consultation with local authorities, to include the land we own in the next local plan, for residential use. If this happens the value can rise significantly. By how much? That’s an impossible question to give a general answer to, but consider that approximately one third to one half of the value of a building is attributable to the land it stands on.
Tel: 020 7965 4747
