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What Uk Land Investors Should Know About Strategic Land Investments
Strategic land stands alone among land investments. It answers the pressing need for home building by increasing land designated for that purpose.
There are a number of ways in which investors can select land as a means of growing their assets. For some, farmland is attractive simply for its sizeable value increases in the past decade; most owner-investors are interested in a long-term position that requires little work other than to collect rent from the actual farmer. Others choose real estate investment trusts (REITs), a market-traded security that tends to rise and fall with the market’s unrelated stocks and bonds. The buy-to-let landlord is an altogether different investor, willing to take on property management responsibilities in a buy-and-hold strategy.
Strategic land investing is quite apart from these types of investments, even though all share certain characteristics. Land ownership in various forms is about acquiring a finite resource, made increasingly valuable with population growth and ...
... the resultant increased demand for housing, food production and commercial enterprises. The following are distinguishing characteristics of this form of land investing:
What is a strategic land investment?
What strategic land does differently is it is about the conversion of land to a new purpose. What may be farmland now can become housing if granted approval by local planning authorities. Once that approval is achieved, the strategic land developers then build components of infrastructure such as roads and utilities according to their design.
Is this asset category right for now?
England and the whole of the UK are in a housing shortage that is aptly described as a crisis. A number of reasons might be cited for this (failure to build social housing, unanticipated high rate of population increase, stringent lending that limits a young buyers’ market, etc.). But as the Government addresses these issues, and as the UK economy has improved, the numbers of people able to purchase a home have increased. Homebuilders want to serve this market, and gradually the pace of building is picking up. But with urban density it’s increasingly important for new land to be available - what property fund managers work to make happen.
There is a need for one million new homes in the UK and they have to be built somewhere.
What is the smartest way to go about strategic land investing?
Most individual investors lack the expertise and capital to go about this on their own. A better method is to identify some alternative investment funds in which a management team is dedicated to the task. These land professionals understand how to pick properties that can be purchased, converted to residential or commercial use and be built-upon with expediency.
Choosing the fund that is best for the investor would be the first step. Some funds involve joint ventures and co-investments with large institutions and investors, all of which should be taken into consideration. What is key is the degree to which the strategic land investment partners can claim expertise in the essential tasks of land site assembly: land acquisition, finance, planning, infrastructure delivery and project management.
For most investors it makes sense to engage a third party, an independent financial advisor, who provides guidance in choosing a fund. An IFA will also identify how much weight to give strategic land investing in the context of an overall wealth portfolio.
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