Is It Worth Buying Land?

With house prices getting away from many of us, it's been a common thought to wonder if you could just build your own. But, first, you need to buy the land, and it's not that straightforward. This raises the question, is buying land worth it?

In this insight, we explore your options for buying land, what you need to be aware of, how you can finance buying land, and if buying land is worth it.

Key Takeaways

• Buying land can be worth it depending on your situation, but factors like costs, market volatility, and regulation changes should be considered.
• Reasons to buy land include investment potential, building a customised home, starting a business, and capitalising on development potential.
• Different types of land include residential, commercial, agricultural, industrial, recreational, amenity, and development land.
• When buying land, thorough research, running searches, evaluating planning permission, and seeking professional advice are essential.

Is Buying Land Worth it?

Whether buying land is worth it depends on your situation. It offers potential benefits like investment potential and flexibility, but costs, development challenges, market volatility, and regulation changes should be considered. 

When deciding whether buying land is worth it, it's essential to carefully evaluate these factors in the context of your specific situation. Consider your financial goals, risk tolerance, long-term plans, and conduct thorough research. Consulting professionals such as estate agents, solicitors, and financial advisers can provide valuable insights to help you make an informed decision.

Why Would You Buy Land?

The main two reasons someone would buy land would be either to hold as an investment, or to build a house. However, there are several reasons why buying land would be of use: 

Investment

Land can be a long-term investment that offers the potential for growth in value. Investing in land with growth potential or in areas experiencing development can lead to financial gains over time.

Building a Home

Purchasing land allows individuals to build their own customised home according to their preferences and needs. This provides the opportunity to create a living space that aligns with their vision and lifestyle.

Business Ventures

Land ownership can enable the establishment of businesses such as agriculture, farming, or commercial ventures. It provides a physical space to develop and operate a business.

Development Potential

Land with development potential can be acquired for future construction projects, such as residential or commercial developments. This allows for capitalizing on growth in the surrounding area.

Preservation and Conservation

Buying land can be driven by a desire to protect and preserve natural habitats, ecosystems, or culturally significant areas. It provides the opportunity to contribute to environmental conservation efforts.

Recreational Purposes

Some individuals purchase land for recreational activities like camping, hunting, fishing, or simply to have a private retreat away from urban areas.

Agricultural Use

Buying land for agricultural purposes allows for farming, livestock raising, or other agricultural activities. This can be a fulfilling lifestyle choice or a business opportunity.

What Are The Different Types of Land?

Land in the UK has a designated purpose. This purpose is assigned by the government. When purchasing land it's important to consider the specific type of land and whether it is already designated to the purpose you intend to use it for. If it isn't, you face the challenge of changing the land purpose.

Designated land purposes include:

Residential Land

This type of land is suitable for residential purposes, including single-family homes, townhouses, or apartment buildings. It is typically located in residential neighborhoods or subdivisions.

Commercial Land

Commercial land is intended for business use, such as retail outlets, offices, hotels, or industrial facilities. The location and zoning of the land often determine its suitability for commercial development.

Agricultural Land

Agricultural land is used for farming, crop cultivation, livestock rearing, or other agricultural activities. It is typically characterized by fertile soil, water resources, and access to necessary infrastructure.

Industrial Land

Industrial land is designated for manufacturing, warehouses, or other industrial activities. It requires adequate space for large-scale operations, transportation access, and utilities.

Recreational Land

Recreational land includes parks, open spaces, and areas designated for outdoor activities. It may be publicly owned or privately owned and used for recreational purposes like sports, picnicking, or hiking.

Amenity Land

Amenity land refers to land that provides aesthetic value or recreational benefits. It may include green spaces, nature reserves, or areas with scenic views. Amenity land is often preserved for its environmental or cultural significance.

Development Land

Development land refers to land with the potential for construction or expansion. It may be unoccupied, presenting opportunities for residential, commercial, or mixed-use development.

Researching The Land

Researching whether buying land is worth it involves gathering relevant information and conducting due diligence. Just like when you buy property, you can employ a solicitor to run searches on the land to check it is suitable for your needs.

The searches to run include:

Title Search

A title search verifies the land's ownership and any existing legal encumbrances. It provides details about the current owner, any outstanding mortgages or liens, and any restrictions or easements on the property.

Local Authority Search

This search reveals information held by the local council or municipality, including planning permissions, building regulations, environmental issues, or proposed developments in the area. It helps you understand any potential future developments or restrictions that may affect the land.

Land Registry Search

The Land Registry keeps records of land ownership and registered charges in a specific jurisdiction. This search confirms the accuracy of the title, boundaries, and any registered interests or rights on the land.

Environmental Search

An environmental search assesses potential risks such as contamination, flood zones, or other environmental hazards that may impact the land. It provides insights into any remediation requirements or restrictions.

Flood Risk Assessment

If the land is located in an area prone to flooding, a flood risk assessment can help evaluate the potential risks, insurance requirements, and the impact on the land's value and development potential.

Utility Searches

These searches identify the availability and proximity of essential utilities such as water, electricity, gas, drainage, and telephone line connections. It ensures that the land has access to the necessary services for development or use.

Alongside these searches, you can consider arranging a survey of the land for an opinion based on the structure of the land as opposed to legal aspects identified by a solicitor. Be sure to consider the results carefully as failing to do so could get expensive later on if you need to implement any major changes to make the land fit for purpose.

Buying Land with or without Planning Permission

When buying land, the presence or absence of planning permission can significantly impact the deal. In the UK, many land plots are sold with Outline Planning Permission (OPP), which means that full permission must be obtained within three years of the OPP's grant date.

Even if Detailed Planning Permission (DPP) is obtained, it doesn't guarantee the ability to build on the plot due to potential restrictive covenants. Land covenants are legal agreements or restrictions that are attached to a property or parcel of land. These agreements dictate how the land can be used or what specific actions or limitations are placed upon the property owner. Land covenants are typically written into the property deeds and are legally binding. 

Land without planning permission should be approached with caution. It's important to question why the land lacks planning permission. Has it been previously refused, or has a previous OPP expired? Thorough examination and legal guidance are necessary in such cases.

Benefits of Buying Land

Investing in agricultural land and forestry provides tax advantages, including exemption from inheritance tax if the land is held for at least 2 years prior to death. However, purchasing land with an existing residential property may attract high Stamp Duty tax, while buying land without a residential property can result in significant Stamp Duty savings. For more information on stamp duty and land, read: Do you pay Stamp Duty on Land? Land without planning permission is often priced lower, but there's a risk of being unable to sell if planning permission is not obtained.

How Do You Finance Buying Land?

There are a few ways you can buy land. Firstly, you could buy the land outright with cash. However, not everyone has that sort of money laying around. If you're sure you want to progress with buying the land you've identified, you can consider raising finance instead.

The options for borrowing money include:

Land Mortgage

The purchase of land can be funded through a land mortgage, a long-term secured loan that uses the land as collateral. Like with a standard mortgage, if you can't make payments, your land may be repossessed.

Development Loans

If you're looking to construct a residential property, a development loan, also referred to as a self-build mortgage, can be used to purchase land for this purpose.

Development loans are an option that can cover both the land and building costs of the property. The funds for the land are released upfront, while the money for the property build is released in stages. Regular valuations are necessary at each development stage, and the funds will be released if each stage aligns with the expected valuation figures.

Bridging Loans

Bridging loans are short-term financing options designed to bridge the gap between the purchase of a new property and the sale of an existing property. If you need immediate funds to secure a land purchase, a bridging loan can provide fast access to the necessary capital. Alternatively, if you intend to let the eventual property, you can consider a Bridge to Let Mortgage. If you're unsure how a bridging loan can help you consider reading our insight: what can a bridging loan be used for?

Getting The Right Advice on Buying Land

To ensure you get the right advice when buying land in the UK, consult professionals such as estate agents, solicitors, surveyors, and financial advisers with expertise in land transactions. Conduct research to understand the land buying process and local market conditions. Seek multiple opinions to gain different perspectives, check credentials, and consider recommendations from other landowners or investors. 

Beware of land investment scams that promise high returns through purchasing plots of land. These fraudulent schemes involve buying land at inflated prices and selling smaller parcels to unsuspecting investors, often with false claims of planning permission. These firms operate outside the regulation of financial authorities, making it crucial to exercise caution. Conduct thorough research and be skeptical of unrealistic promises. Countless investors have lost substantial sums to these scams. Stay vigilant and protect your hard-earned money.

Final Thoughts

So, is it worth buying land? It does depend on your personal circumstances, the reason you intend to buy the land, and the quality of the land available. If you don't have the right intentions and plan thoroughly before you act, it could result in a headache. You'll be left wishing you hadn't started. That said if you're building a house, it's a once-in-a-lifetime opportunity to seize.