Risk versus Reward
When looking at opportunities for long-term capital growth potential, UK land has returned stunning rates of growth coupled with low risk.
Overall prices (farmland) have increased by up to 30% in the last 12 months and 130% since the mid 1990's, land with residential approval has averaged over 800% growth in the last 20 years.
Well chosen land is an attractive opportunity that should be included in every portfolio.
When looking for long-term capital growth most investors consider mutual funds, investment trusts, stocks, equities, and hedge funds. However, the fact is that land has shown better average growth with less downside volatility. This makes land a solid prospect for the conservative risk conscious investor.
Why land has such great potential?
When looking at opportunities for long-term capital growth potential, we need to look at the supply and demand equation.
Land has all the ingredients for demand to exceed supply and see land prices climb in the coming years.
Why UK Land?
When looking at opportunities for long-term capital growth potential, it is clear that of all the countries in the world for land opportunities, the UK is one of the most attractive for the following reasons:
- Rapid Population Growth - The population of the UK in 1981 was 56.2 million, In 2001, the population had increased by about 2.6 million to 58.8 million.
- Immigration - In terms of immigration there is the granting of entry to the UK, of over 170,000 people per year. This constitutes over 60% of the annual population growth. Therefore at current rates of growth the UK can expect to see at least an additional 3.4 million inhabitants within the next 20 years.
- Social Trends - There is also a rising divorce rate in the UK. In 1980 and there were approximately 148,500 divorces throughout the UK in 2000 this figure climbed to nearly 200,000, an increase of over 30%. Furthermore, more people are staying single by choice and getting married later in life.
A recent Treasury report stated that: “In the next 17 years with the rising population and increased lack of affordable housing, the UK will need another 1.5 million homes with 300,000 required in and around London alone.”
Essentially, this means that there is a need for massive scale housing development in the UK at present and for the near future.
This will see UK land remain one of the most attractive for long term capital growth.
The demand for UK land
Much of this new housing will be on Brownfield sites, or redeveloped areas as this land is in short supply and is expensive to purchase and develop. This will necessitate the reclassification and development of Greenbelt land throughout Britain.
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Asset Class Comparison(Click for larger image)
Land Value Growth(Click for larger image)
