2 ms·
Near my old house there were large areas of land that have sat empty for 20 years through successive rounds of planning permission. The reason is very simple:
by vidarh 2y ago
Near my old house there were large areas of land that have sat empty for 20 years through successive rounds of planning permission. The reason is very simple:
You can buy land for X. You can spend Y to construct housing on it, and sell it now for Z, or you can sit on the land, safe in the knowledge that housing policy means prices will keep rising, and then you can spend Y+inflation, and sell it for Z times a factor far higher than than inflation.
If you finance X via investors or loans, this is effectively leverage. You finance Y the same way, but short term during construction, so you get a leveraged return on the growth of house prices in return for investing to buy only the land.
Couple this with constraining supply by sitting on underutilized land.
Another of the developers in the same area has still only built about one third or half of the buildings they're meant to build on another set of parcels that were first also available 20 years ago. They have no incentive to rush until investors want to exit.
- harambae 2y agoI don’t know your particular area, but I have experience buying and selling raw land and it’s a much more unique and niche area of real estate that fewer people are competing in. Are you sure it’s actually zoned correctly and doesn’t have latent disputes? I can give you plenty of stories of people who bought an empty chunk of land for $350k and then 20 years later sold it for around $350k. They would’ve done better investing in Pokémon cards (or anything). Add on the flip side developers usually want to move fast and cash in now, in my experience, not do what you’re describing.
- vidarh 2y agoIn this case it's outer London. And, yes, one of the plots has had planning permission for years, and had the owners re-apply regularly for buildings in the 40-75 floor range, and the council has fallen over itself to approve it each time. The other involved a lengthy planning process with a plan agreed around 20 years ago for developments that are still not complete. What you're describing makes sense in a market where there's plenty of options. In London land is scarce, and developers hoarding it makes it scarcer, and so both land values and housing prices have skyrocketed.