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Why
invest in land?
Why
you should invest in the
fastest growing resource this country has to offer?
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| Houses and industrial buildings are easy to value
because they can be compared with equivalent items in the
immediate vicinity, a local estate agent will have an accurate
view on, say the price of a local 3 bedroom detached house in a
standard sized plot. Land is tricky to value because although
its base price is low its value varies greatly by what it can be
used for. This is what makes it such a great investment. |
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| This is where it becomes easy to value the land.
Historically when building a house on a plot of land
everyone involved has used the same formula which is that of the
houses selling price one third was the land cost, one third was
the build cost and one third was marketing, selling, profit and
overheads. |
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| However this is showing signs of changing, with
house prices spiraling upwards the actual build costs
have increased at a much slower rate, and also in a
increasingly competitive world profit margins have been
reduced. This means, for example, that where before a
house selling for £450,000 would have had a land cost
of £50,000, a build cost of £150,000 and a
marketing/profit cost of £150,000 these days a £450,000
house will now have a land cost of £200,000, a build
cost of £150,00 but a marketing/profit cost of £100,000.
This trend is of massive advantage to the existing land
owner and all indications show that the percentage of
land cost to overall selling cost is rising, with
predictions of 45%
- 55% by the year 2010. |
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Yes, very much so. This is directly influenced by
the Housing Market and employment trends. Land within commuting
distance of major towns is still the most desirable and
expensive. for instance an acre of land in a Scottish hill side
might be worth £2,000 but an acre in central London will be
worth £4,000,000.
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Land prices
have risen by more than 926%in the last twenty years
out-stripping house prices.
Source:
BBC |
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| Large
developers have been ‘stockpiling’ land into their own
land banks with the knowledge that in future years as
towns and city’s naturally expand planning will be
granted. |
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| This enables
the shrewd private investor to emulate the fortunes that
have been made by developers without tying up huge sums of
money. |
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