Land Banking




Land banking is the practice of purchasing land with the intent to hold on to it until such a time as it is profitable to sell it on to others for more than was initially paid. Land is becoming increasingly popular as an investment due to the benefit of its being a tangible asset as opposed to Shares or Bonds. This type of investment has gained such popularity it is now possible to land bank worldwide and there are several firms set up to offer opportunities to do so.

Parcels of land desirable for “Land Banking” are those that lie directly in the growth path of rapidly developing cities. The initial goal is to buy undeveloped land that will increase in value because it lies in the path of urban growth. The key is to identify these parcels well in advance of the developers and wait for their values to mature. With diligent research, financing and managing of a land banked property, one may be able to realize a profit upon the final sale.

Land banking as an investment, is nothing new to America. Several self-made millionaires started by purchasing large tracts in California where the development opportunities had not yet arisen. People such as Bob Hope and Donald Trump have reaped tremendous reward from buying large areas and holding the property until the market commanded a considerable return when sold. There have however, also been many land scams in the US. (Example: Huge tracts of worthless Florida swampland being sold as suitable for real estate.) Glengarry Glen Ross (film) demonstrates this unethical method of selling land.

Agricultural land banking

While most land banking is based on the prospect of urban areas expanding at the expense of rural areas, in various parts of the world agricultural land is expanding at the expense of virgin land. The purchase of virgin land, that has been identified as suitable for agriculture, due to its climate, topography and soil properties, and where the buyer has no intention to work the land himself, or to lease it out, would be agricultural land banking.

Such lands are often rather far away from existing infrastructure when purchased by the land banking investor, therefore prices being low. The investor anticipates that, due to the area’s natural productive potential, an agricultural infrastructure (sufficient roads, specialised contractors, grain storages) will develop, with more land put under cultivation and land values multiplying.

Agricultural land banking is found where large tracts of fertile virgin land still exist, where valuations are low and where legislation allows large land holdings (free hold) by domestic and foreign investors. Typical countries for such investments during recent years have been Argentina, Brazil, Paraguay. Though the perception that the world’s fertile land is a limited and valuable asset is by no means new, it received renewed public and media attention with the Global food crisis, when phrases like “peak grain” or “peak soil” were coined.







"Land banking, http://en.wikipedia.org/w/index.php?title=Land_banking&oldid=277171588 (last visited Mar. 18, 2009)."

Real Estate Insurance Contact Disclaimer