Turning land into gold
26th August 2017
When you purchase a property, especially a flat in Central London, what you are buying in essence is a shoe box, sometimes perhaps a cube in the case of a studio.
The cube itself has very little value; by virtue of its location it acquires value. If it was in the upper end of Scotland there would be perhaps even a zero premium to what it costs to build, as demand to live there would be low.
So, what gives the property value is location. Hence the famous mantra, Location, Location and Location. The three most important factors to property investment; said thrice because it cannot be emphasised enough.
Whether the property is 30 storeys high in the sky, or firmly on the ground, the property occupies a piece of land in a desirable location. Building a property requires two other ingredients namely labour and materials. Within reason, the latter two are not in short supply – they can be procured. The ingredient which limited in supply is land. So, in essence, it is land which is scarce which ultimately causes property to rise in price.
Land is governed by regulation. A piece of land can have one storey or a hundred; what governs this is regulation. This is what restricts supply. For example in Central London it would be unheard of for a chunk of Hyde Park to be sold to a developer and built upon. It is due to regulation that period buildings are listed and cannot be altered.
Land is the intrinsic reason why property prices rise. And what governs the ability of a piece of land to produce property is also regulation.
Converting a piece of land from grazing land to one where property can be built, requires a change in its utility, i.e. its usage.
This is a process which can be likened to alchemy, the changing of lead into gold. It is with this backdrop that we are now heavily focused on land investment, both in London and in the increasingly affluent commuter belts around London.
The greatest gain to be made by investing in ‘property’ is actually to invest in land and in being able to change its function so it acquires economic value.
This requires both planning expertise on a local and national level, along with an ability to lobby to the individuals concerned. It is with good reason we have this focus, the uplift in value of a piece of land which has planning can be three or more times its price without planning.
Recently, we have successfully obtained planning for 92 units in North London, on behalf of our client.
We currently have other opportunities, where we are looking to replicate this success. If this interests you, please get in touch.