We may start 2016 in the cold, rain and snow, but one thing set to be hot this year is the buying and selling of small and highly affordable plots of land via auction.
This was a trend that really built up some momentum towards the tail end of 2015. One example was a small 0.2-acre garden plot, with poor access and limited chance of securing planning consent, guided at a respectable £10,000-£15,000 to reflect the site’s constraints.
The landlord, an elderly woman, had the intention of selling the land to fund a final holiday while she still had her health and in a packed room witnessed a bidding frenzy that saw her tiny plot fetch a monumental £70,000. The next day, having recovered from the shock, she booked a once-in-a-lifetime world cruise.
She was not the only winner; the buyer had spent years searching for a small, out-of-the-way spot to park his caravan and breed his collection of rare chickens.
This rather heartwarming tale is not a one-off. We have seen numerous examples of low-value plots trading extremely well in auction rooms across the UK, with sellers ranging from private individuals to national utility companies wanting to rationalise their extensive portfolios.
To many buyers, such plots offer an affordable entry into the often exclusive property investment market and with low guide prices, limited maintenance, outgoings and liability it is an attractive proposition.
Even better for sellers is that location has become of little concern to this new breed of Grand Designs buyer, ranging from self-builders and overseas investors to novice buyers looking for a nest-egg for the grandchildren.
For astute buyers, there is a good chance of significantly increasing the value of these plots by obtaining planning consent and consequently unlocking the value of neighbouring sites.
Yet, even for the uninitiated, land can bring a return that is many, many times its original investment cost. Increases in land value obviously boil down to supply and demand and in our current climate it is both a savvy purchase and a worthwhile sell.
You only have to look at Walt Disney, who in the late 1950s land-banked more than 30,500 acres of land to create his California theme park. The majority of owners were happy to get rid of the mostly derelict swampland for as little as $100 (£70) an acre. Fast-forward almost 60 years and its worth is almost incomprehensible.
Purchasing these small plots of land is therefore a smart way to invest in assets where values can grow without having to put too much effort into the process. Rather than letting your money sit in a bank account with poor interest rates, this is a low risk, high reward way of putting your money to work.
The auction process is an easy and efficient way of purchasing property, bypassing the complexity of private treaty sales and is the ideal way to make potentially lucrative investments.
As the great Mark Twain once wisely remarked: “Buy land, they’re not making it anymore.”
Paul Giles is head of commercial auctions in Nottingham for Savills
