Purchasing land, especially when property prices appear flat, may seem like risky speculation. But it doesn't have to be, says Barry Cashin.
However, for the astute investor, whether your plans are to redevelop an existing property or build anew, buying the right land is a sound investment if you know what to look for, how to get the best from the experts involved and if you do the necessary research beforehand.
Defining your requirements
People buy land for a multitude of reasons. A growing number see it as an alternative investment to property - something that is certainly safer in the medium to long term than plunging one's finances into shares or the volatility of the property market.
Empty nesters, having built up sufficient equity in a family home that is perhaps now too big may look to acquire land for a bespoke self-build project constructed to their own specifications and lifestyle needs. Others buy land as a gift, maybe to assist their adult children realise the dream of building their own first home - while developers will always be interested in plots to redevelop into flats or houses for a quick profit.
Whatever purpose the land is needed for and whoever buys it, the rule caveat emptor ('let the buyer beware') still applies. The key to successful land acquisition is thorough research to mitigate the risks, and asking yourself four important questions:
Purpose - why do you want to buy land?
Use - is the land suitable for your plans?
Cost - does your budget cover the cost of the land, building, legal and survey costs, plus a contingency for the unforeseen?
Re-sale - will your project realise a profit?
Exactly how much a plot of land will cost depends on several factors, notwithstanding its location, size, proximity to transport links and whether it benefits from any type of planning permission. Land sold with planning permission is always more expensive than that without.
Land values are also relative to the general state of the property market, so currently prices are more competitive than, say, a year ago. That said, land experts Strutt & Parker say that rural greenfield land values actually doubled over 2006-08, bucking the trend of the general downturn.
Finding the right plot
Land for sale is generally categorised as follows:
Brownfield - land that is or was occupied by a permanent structure that has become vacant or derelict and has redevelopment potential.
Greenfield - undeveloped land, such as parks, forest and countryside.
The first port of call for most people wanting to purchase land is a specialist land agent or estate agent. However, agents are only one option and it is always worth looking around and asking local developers if they have any individual plots for sale. In today's property market where new home sales are significantly weaker than last year, many smaller developers who have over committed themselves to projects and now unable to complete them are looking to offload parcels of land at competitive prices, just to free up cash. The internet also provides a rich source of land buying opportunities.
Other land buying opportunities
Auctions - land auctions are a good way to find suitable plots but transactions are conducted on a 'sold as seen' basis and therefore require a quick sale, leaving little time for research.
Local authorities - cash-strapped councils often have parcels of land they are willing to sell.
Utility companies - some utility organisations such as water, gas and electricity companies have surplus land available to buy.
Private enquiries - many private residential homes have large gardens with building potential.
The time honoured mantra of location, location, location applies equally to land acquisition as it does to property. Whether using the land for a self-build project for personal use or redeveloping it for profit, one should always have an eye on re-sale.
You are far more likely to achieve a higher resale value if the location of the plot or development is convenient to transport links, shops and amenities. If the land is for residential redevelopment in a rural location, the property usually has to have exclusivity and uniqueness to realise its full value potential.
Surveying the land
A proper survey of the land carried out by a qualified land surveyor is essential and will highlight all boundaries, services, overhead power lines, public or other rights of ways and flood risk. Land surveyors also perform a vital function in carrying out feasibility studies, or environmental impact assessments on potential sites to assess whether plans are workable.
One key advantage of having land properly surveyed is that title deeds are often outdated and boundaries have a habit of changing over the years. A clear, unequivocal land survey will define the lay of the land for the avoidance of any doubt, negating potentially costly neighbour disputes down the line. When choosing a surveyor, look for those who are fully qualified and who are ideally members of the Royal Institution for Chartered Surveyors.
There are three basic scenarios when buying land insofar as planning permission is concerned:
- the land has no planning permission
- the land has outline planning permission
- the land has detailed or 'full' planning permission for a building for which a set of plans has been submitted and approved.
Before proceeding to purchase land, it is vital to establish with the local authority that they will ultimately allow you permission to bring your plans to fruition. Otherwise there is no purpose in buying it in the first place.
This said, acquiring land with planning permission already granted doesn't necessarily guarantee that you will be able to build on it. There may be restrictive covenants attached which preclude you. This is an area your lawyer should carefully check.
Buying land with an existing property standing on it provides an easier solution as it benefits from what is referred to as past precedent. In such situations, it is usually easier to get full planning permission if either redeveloping an existing property or demolishing it and rebuilding a new one as per the original style or footprint - in the case of the latter, only of course if your plans are reasonable and in keeping with the neighbourhood.
Dealing with planning officials
In all situations, it is vital to establish a good relationship with your local council's planning office. Planning officers are generally fair people and if you can build a rapport with them and your proposals are not too ostentatious, you are far more likely to receive a favourable response to any reasonable planning request.
The best way to garner support from your planning office is to involve them in the process from the outset, holding early site meetings to discuss your intentions on an informal basis and without cost to yourself. Planning officers usually offer constructive advice and suggestions, which will assist you in drawing up detailed plans that are far more likely to get approved at the first hurdle.
The legal process
The legal procedure for buying land is generally a lot less complicated than buying and selling property. It should always be conducted by a qualified solicitor specialising in land transactions. As land is a valuable commodity often quickly snapped up by other buyers, you should be looking for a lawyer who is energetic and enthusiastic to your cause. Use the lawyer's knowledge and expertise to answer important questions relating to issues such as permitted use, boundaries, footpath or other public access and rights over the land issues, to satisfy yourself that the purchase is a sound one.
Availing your lawyer at an early stage with as much detail about the plot as possible is crucial. This could be in the form of site photographs and your intended plans for its development. You can establish whether an aerial photo of the plot exists by visiting the site www1.getmapping.com.
The lawyer's function will essentially be to check that the land has clear title - i.e. is legitimately for sale - and to initiate searches to see if there is, or has been anything which could affect the stability of the land such as previous mining, flooding etc. They will also check the legal documentation relating to the size, scale and dimensions of the site to ensure that you are buying what is being sold.
Once your lawyer is satisfied that all is in order and you are sure that you have, or will get the necessary approval for your intended use, then it is usually safe to proceed to purchase. Obviously, if buying land at auction, one only has a limited amount of time to conduct the research and legal work and therefore buying land this way carries significantly more risk.
Further information about both land and property can be found on the Land Registry website. For £2 you can search the detailed history and ownership of property including information on the land, planning permission and rights of way.