Development Land Investment

A Highly Profitable but Very Risky Strategy

Investing in Development Land

With a demand that far outstrips supply, it is not surprising that government and councils are opening up land previously restricted to developers to allow them to build residential housing.

With that in mind, speculative investment has grown in popularity in the hope that it will be granted planning for development at some point in the near future. However, while this can bring huge profits, due to the speculative nature, it can also turn out to be fools gold if planning is eventually refused.

The 3 most important things to remember when buying land is 

  • Location
  • Location
  • Location

The build costs remain about the same wherever you build in the UK (although labour costs may vary) So buying land within travelling distance of London where the completed sale price of the exact same property could be 10 times higher than a property on the outskirts of Sunderland for example. This can make a huge difference to the profit on a project.

The next thing to consider if the property does not have planning is whether there is planning for future development. There are two main types of planning. Outline planning where permission is given for the land to be developed into residential, commercial or industrial. Then there is detailed development where permission has been given, not only to the type of development, but the details of the exact structure or structures that will be allowed to be built. Down to the materials used for the construction. 

There are a lot of other things that can seriously affect or greatly restrict planning. Certain conditions may be set, especially in conservation areas, industrial land, areas of natural beauty or where wildlife may be affected. All of which are outside of the scope of this article. 

The Sterling Woodrow Offering:

Hands-off Investments

Our senior portfolio managers handle everything whilst you receive your return on investment

High Yield Returns

Generate high returns for up
to 5 years. 

Capital Appreciation

Property investments have the opportunity for capital appreciation over time.

Types of Land investments

  • Residential development land
  • Commercial development land
  • Agricultural – Livestock
  • Agricultural – Arable
  • Forestry 
  • Recreational land

The most common investment opportunities tend to be for residential or commercial land.  Buying land with planning permission attached will be at a premium, carries the least risk but offers the lowest rewards. 

When buying land it is important to do your research taking historical and current land prices into account. Understanding the market value with and without planning, if you intend to develop the land, the sale value on completion as well as the fluidity of the market in that area.

Environmental issues and petrol station clean up or restrictions due to wildlife risk of flooding or subsidence from mining.

What some of our clients have to say…

I’m originally from Leeds but now live in Australia working as a university lecturer. It’s always been our aim to ultimately move back to the UK so I’ve taken an interest in the UK property for many years. I’m also very aware of the lack of accommodation for students close to major universities. A friend recently put me in touch with Sterling Woodrow and it was instantly apparent that these guys knew their market so my wife and I finally decided to invest.

David Johnson

First time investing into a fully managed investment. I made an enquiry online boasting 10% returns per annum. Within a few days I received a call from one of the portfolio managers Ben, who was extremely helpful and wanted to understand more about my goals and what I wanted to achieve than actually trying to sell the product which was a breath of fresh air. I received all the info and had lots of questions regarding the Hotel Investment, all of which he answered simply and easy to understand.

James Tingley

Whether you live overseas or in the UK if you want to invest in property it’s important to find an agent that will go the extra mile for you and that’s exactly what Sterling Woodrow did for me. Although I knew a lot already it was still good to have those guys available when I needed them and it didn’t cost me anything.

Mohammed Alkhaiwani

Speculative Land Investment 

There are two main types of land: Greenfield land and Brownfield land. 

Greenfield Land 

While there is a lot of greenfield land obtaining planning due to the huge deficit in housing stock, it can be very difficult if not impossible to obtain planning on many greenland sites. Especially agricultural land, sites like parks, woodlands, land with historical or archaeological value, areas of natural beauty or where it could negatively impact the local wildlife. Quite often expensive studies have to be carried out that can take months or years to complete and even then planning may well be refused.

Brownfield land

Brownfield land has typically been built on before, setting a precedent that makes it much easier to obtain further planning for new development. However, the rules change and as we discussed above planning could be affected by the arrival or discovery of wildlife like bats or newts in a lake or pond on the land. Also, if you are looking at land that was previously used for commercial or industrial you may not get planning approval to build residential. If you do obtain planning there could be substantial additional costs if the site was previously used as a petrol station or a chemical works. Expensive surveys and studies might have to be carried out followed by a big clean up operation.

Again, with the changes in weather patterns, areas previously built on may now be subjected to regular flooding. Other considerations include local infrastructure for access and sufficient amenities to allow for the increase in population.

Huge Gains but Bigger Risks 

Speculative purchases with the opportunity to obtain planning offer huge profits whereas land with planning will usually sell at a market value providing lower profit margins. However, some bargains can be found if you know where to look and there are building developers who are desperately seeking development land and will pay over the top for the right size in a good area. If you look to buy a plot of land in the belief that it will obtain planning permission, you could end up paying over the top for it as a speculative investment. If it is subsequently refused planning then you have a definitive answer and you could see the value drop substantially. 

In summary

Land can provide huge potential profits but you really need to know what you are doing and be careful as it may be a gamble and you could end up on the losing side.

For more information on Land Purchase contact Sterling Woodrow.

Are you ready to take the next step?

To learn more about the student property opportunities available through Sterling Woodrow, contact us today.