Does land still make a good investment?

Photo: Broo_am

Land has always been a sector filled with as many potholes as perks, thanks to a reputation built up by eager salesmen and potential scams. There can be genuinely profitable opportunities, though, if you know where to look.

Fortunately, land is one thing every country has in common, so you are not short of options. On, demand has been strong for several land investments around the world.

In Argentina, a plot at a five-star sports club in Buenos Aires has promised returns of up to 57 per cent with guaranteed resale – or the opportunity to keep the plot and built a unit on it at a later date. Indeed, construction on the La Providencia site is already underway, with the entrance completed and a road connecting the project to a highway scheduled for completion in the coming year.

The investment highlights a key aspect of a reliable land investment: guaranteed development. While some salesmen may claim to have planning permission pending on a plot of land, it is only possible to generate returns if that potential is actually fulfilled.

A similar opportunity in Canada has proven equally popular in the last six months, with investors able to own plots to build on – or sell back the land at a higher price in 24 to 36 months. The number of enquiries received by the Forest Lakes Country Club has only been topped by a similar listing in the Bahamas, which enjoyed a boost in appeal from the country’s friendly tax laws.

Again, it is important to emphasise that these are all land plots attached to ongoing developments, as opposed to land with merely the potential for construction. In countries such as the UK, where demand for housing is high and supply is low, efforts are being concentrated on stimulating the new build sector and driving up activity. As a result, development land values are climbing: they rose 7.3 per cent year-on-year in the first quarter of 2014, according to data from Knight Frank. In London, where the market’s imbalance is more extreme, land values have risen even higher: by 15.9 per cent year-on-year in March.

Farmland, too, has been enjoying a worldwide boom. Offering a very different investment to development land, agriculture is more readily able to generate returns: it does not rely on potential planning permissions to become valuable, but will be needed by a farmer for livestock or crops, as the global population (and demand for food) steadily increases.

Prices of farmland in the UK have therefore climed at an equally impressive rate of 1.5 per cent in the first quarter of 2014 to reach an average of £8,700 per acre. Farmland in the USA has seen a similar growth in prices, albeit with regional differences. Some experts have forecast a downturn or even a farming bubble, but with one-fifth of China’s farmland recently found to be polluted, the demand for arable land currently remains steady.

Whether you plump for farming or building opportunities, land can still make a good investment – if you know where to look.

Land grab scandals in Spain, which see developers able to take land from private owners at a fraction of its cost, have helped to weaken confidence in the sector, but if you research your market and avoid cold-calling scams, land can reap a strong financial yield.

After all, 100 years on from Mark Twain, they’re still not making it anymore.