There absolutely are opportunities to increase asset value in UK land with development. But it takes at least four groups of leaders to make it happen.
The value of land has always been understood, going back centuries to when invaders and explorers sought new sources of agricultural products, minerals and places to live. It was a matter of economics that Christopher Columbus sailed for Spain, having convinced the King and Queen that their investment in his adventure would yield a great return.
Surprises in land value appreciation surface from time to time, of course. The Bedouins of the Saudi Arabian peninsula lived a nomadic subsistence for centuries until they discovered oil in the 20th century beneath the undulating sands of their desert kingdom. In a modern world, some land becomes more valuable when an industry (“Silicon Valley”) or a major point of transport is established in previously middle- or lower-value areas.
It’s hard to imagine that some land sites in the UK could be undervalued. The population is growing more so than in the Eurozone, the country being attractive to immigrants of every stripe. This tends to make one think that all land in the British Isles is simply going up in value at roughly the same pace. However, certain sectors – London and the South East in particular – are faring better than their neighbours in the post-Recession economy. Less fortunate are the counties to the north and west, where recovery as of 2013 was slower and less robust.
But in both these favoured and less-favoured areas of the UK there exists land that is hiding in plain sight, ready for investment and development. This is property that for one reason or another could accommodate residential development, but perhaps for the lack of people able and willing to make it happen. These people fall into four groups, and each of them is necessary to take undervalued, raw land and turn it into something much more productive and valuable:
1. Business leaders – Residential development of market-rate housing rarely makes sense unless there is new or growing employment opportunity in the vicinity. With new jobs must come new people within relative proximity of the new workplaces.
2. Land investment and planning use specialists – The time and capital required to take raw land and turn it into streets, utilities, homes and homebuyers is typically two to five years, when all goes well. So someone has to carry the considerable costs. While banks historically have done this, stringent lending standards are driving more developers to find private investors (who, it should be noted, are flocking to real estate because of disappointment with other types of investments). This is typically a “round one” of the development process, where the investors’ money is used to acquire sites, work with local planning authorities to get appropriate zoning approvals, develop sewers, other utilities and streets, before selling the land in “round two” for construction.
3. Local planning authorities – Only towns where growth is desired will approve land use changes necessary to support development. Thanks to the Localism Act and other efforts under the National Planning Policy Framework, the decision-making power has been decentralised to enable smarter planning in the hands of those most affected by it.
4. Homebuilders – These are the “round two” leaders who complete the process. They identify the size, type and value of homes that are needed and are most likely to be sold successfully, after which they construct them.
Of course, each of these groups acts out of self-interest. But they must work in cooperation to a certain degree, and usually share the goal of financial success for the community as a whole. Lately, there has been a surging interest between civic leaders, business leaders and property fund managers to create joint venture partnerships and pool their resources for mutual gain.
The place for individuals to participate in this leadership process includes the investment side. Anyone with £10,000 or more to invest can work with the land development specialists. But before doing so, such individuals are encouraged to seek advice from an independent financial planner, someone who can objectively review the alternative investment opportunity to see where it fits the investor’s risk portfolio.
The value of land has always been understood, going back centuries to when invaders and explorers sought new sources of agricultural products, minerals and places to live. It was a matter of economics that Christopher Columbus sailed for Spain, having convinced the King and Queen that their investment in his adventure would yield a great return.
Surprises in land value appreciation surface from time to time, of course. The Bedouins of the Saudi Arabian peninsula lived a nomadic subsistence for centuries until they discovered oil in the 20th century beneath the undulating sands of their desert kingdom. In a modern world, some land becomes more valuable when an industry (“Silicon Valley”) or a major point of transport is established in previously middle- or lower-value areas.
It’s hard to imagine that some land sites in the UK could be undervalued. The population is growing more so than in the Eurozone, the country being attractive to immigrants of every stripe. This tends to make one think that all land in the British Isles is simply going up in value at roughly the same pace. However, certain sectors – London and the South East in particular – are faring better than their neighbours in the post-Recession economy. Less fortunate are the counties to the north and west, where recovery as of 2013 was slower and less robust.
But in both these favoured and less-favoured areas of the UK there exists land that is hiding in plain sight, ready for investment and development. This is property that for one reason or another could accommodate residential development, but perhaps for the lack of people able and willing to make it happen. These people fall into four groups, and each of them is necessary to take undervalued, raw land and turn it into something much more productive and valuable:
1. Business leaders – Residential development of market-rate housing rarely makes sense unless there is new or growing employment opportunity in the vicinity. With new jobs must come new people within relative proximity of the new workplaces.
2. Land investment and planning use specialists – The time and capital required to take raw land and turn it into streets, utilities, homes and homebuyers is typically two to five years, when all goes well. So someone has to carry the considerable costs. While banks historically have done this, stringent lending standards are driving more developers to find private investors (who, it should be noted, are flocking to real estate because of disappointment with other types of investments). This is typically a “round one” of the development process, where the investors’ money is used to acquire sites, work with local planning authorities to get appropriate zoning approvals, develop sewers, other utilities and streets, before selling the land in “round two” for construction.
3. Local planning authorities – Only towns where growth is desired will approve land use changes necessary to support development. Thanks to the Localism Act and other efforts under the National Planning Policy Framework, the decision-making power has been decentralised to enable smarter planning in the hands of those most affected by it.
4. Homebuilders – These are the “round two” leaders who complete the process. They identify the size, type and value of homes that are needed and are most likely to be sold successfully, after which they construct them.
Of course, each of these groups acts out of self-interest. But they must work in cooperation to a certain degree, and usually share the goal of financial success for the community as a whole. Lately, there has been a surging interest between civic leaders, business leaders and property fund managers to create joint venture partnerships and pool their resources for mutual gain.
The place for individuals to participate in this leadership process includes the investment side. Anyone with £10,000 or more to invest can work with the land development specialists. But before doing so, such individuals are encouraged to seek advice from an independent financial planner, someone who can objectively review the alternative investment opportunity to see where it fits the investor’s risk portfolio.
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