Is land a good long term investment ?

Cyril

I already have some land and a stable yard for my horses and am wondering if I should buy a bit more as an investment. I haven't really kept a track of what land sells for as this plot is for recreation rather than reward.

I am trying to long term widen my provisions for my retirement and not have all my eggs in one basket. I have a company pension final salary scheme, buy to lets and the above which I could rent out for income when I'm too old to do horses. I just wondered what would make a better investment over the longer term.

Any thoughts.
I'm in Hampshire if it makes a difference.

G_M

If the land is in an area where development is likely to take place, it's an excellent investment. If it is likely to remain designated as farmland, no.

There are some excellent companies that will sell you plots within firelds which are guaranteed to go up up value (subject to smallprint) by at leaxt 500% within 7.5 yars if planning permission is granted.

westy22

A few acres and a stable yard in Hampshire should be a prime investment. Lots of people are looking for such a property and IMHO demand will only increase over time. Small pockets of land, say to 2 to 5 acre paddocks, especially if they have road access, good fencing and water will always fetch a premium price.

Cyril

Thankyou both.

I know the sort of schemes G_M talks of and am not looking for that kind of investment ( loosely termed ) but to buy some small acres of my own. My current parcel is 7acres and lends itself to splitting nicely into two with a yard on each half. When i'm retired I could rent out both yards.

Am looking for similar for capital growth and an option for income and was wondering whether land being a finite souce would be better than bricks and morter.

paddedjohn

Buy what you can, as my Dad used to say " they're not making any more"

abaxas

Just remember that you land could go up in value by 50% but then the pound goes down by 33%. You appear rich, but in reality have just lost out to inflation.

Any investment should be viewed in terms of both making money and longer term value.

princeofpounds

The economic theory is, more or less, this:

One of the best features of land is that it is a real asset. That means it is protected against inflation. Investments that are not protected in such ways (eg cash, fixed income) typically underperform over long timeframes simply because our monetary system normally suffers periods of inflation above expectations from time to time.

The reward (in this case, rental yield) you get on an investment is generally related to the risk. Given land is generally low hassle and known to always have some kind of real value even if the financial system were to fall apart (you can stil grow potatoes on it!), you can't expect to get much yield on it as you aren't taking much risk. That is not so great for a long-term investment, unless you particularly value low risk for some reason. It's not a problem, just don't expect miracles.

You can improve things if the economic productivity of the land increases, which means that someone will be willing to pay a higher rent to utilise it (and the corollary a higher price to own it). That can either be direct (eg gain planning permission) or indirect (eg big farm opens next door to a previously remote plot).

That's where the 'miracles' can be made in land - mostly from working the planning system. Brown envelope to councillors territory ;-)

That then gives you a higher rent on the land, or a higher price if you sell on the basis of yield = rent / price, or rather price = rent / yield.

Final point is that the 'yield' is the most subjective thing that causes cyclicality in markets and you can lose a lot of money if you buy at the wrong yield compared to what people in the future will demand in terms of yield. Just like in houses.

I wasn't very eloquent there, but hope you get the idea. The economic principles of land and building investment are actually pretty similar. It's unlikely to be much of a diversifier compared to your buy to lets, although arguably you have more exposure to agricultural cycles/tenants and planning policy risk, and less to building maintenance and residential tenant risk.

gwernybwch

I think that the general consensus is agricultural land is getting close or has reached its ceiling price for the short-term. The price of agricultural land has risen sharply over the last 5 years or so, due to a number of reasons (i) in times of recession it is seen as a 'safe bet' (a bit like gold) (ii) the direction of travel for EU farming subsidies is to de-link production from subsidies, therefore you receive your subsidies more on the amount of land that you own and not the amount of food that you produce (iii) record farming profits have resulted in the price of land being pushed upwards

There used to be good tax avoidance (particularly inheritance tax) methods through owning land, although I'm not sure that they still exist.
In the short-term, I don't see it a good investment, unless you buy and sell non-agricultural lots.

An alternative that might be worth researching is forestry land?

FraudBuster

Caveat Emptor.

FSA secures £32 million High Court judgment against three land banks but victims are unlikely to get their money back
FSA/PN/030/2012
21 Mar 2012

Continued:

http://www.fsa.gov.uk/library/communication/pr/2012/030.shtml

westy22

In the short-term, I don't see it a good investment, unless you buy and sell non-agricultural lots.

That is the key point - selling small pockets of 2 to 5 acres attracts the non-agricultural buyers i.e. horse owners and smallholders. There is a greater demand from these types of buyers and they generally have much deeper pockets than commercial farmers!

Cyril

Thankyou all for your thoughts.

My existing land doesn't have any agricultural restrictions on it and I will probably look to increase value through development of some sort via planning system which seems to be changing to make it easier for sound development.

In terms of additional land I like the flexibility and I hear what you say about small acreage pony paddocks but I find these sellers have got cute and are instilling uplift clauses so they can benefit any future increase in value following development. This of course doesn't make it such an attractive proposition for someone wanting solely returns on investment.