Land Banking

Landing banking is a property investment strategy utilised when market conditions favour it. It is more of a speculative strategy where you buy land to on sell for a profit later on. Therefore should property investors consider land banking as part of their investment strategy?

Wikipedia has a good explanation of what Land Banking is and it’s history.

Land banking is the practice of aggregating parcels of land for future sale or development.”

Property developers are the usual purchasers of land for “banking” i.e. holding until the timing is right to parcel into titles to sell as sections for sales or develop into ‘house and land’ packages for sale.

There are risks associated with land banking. The purchaser is taking a gamble that the land is desired for later development. Soil tests are taken to ensure the land can be developed however actual approval for the development has more often than not been granted.

The property developer will more than likely commence the consent process after the purchase of the land. Hence the term ‘land banking’. The land is held for weeks, months, something years until it can be parcelled for sale after council has given approval.

Regions of greater Auckland are experiencing “land banking” as part of the ‘Special Housing Areas’ which were designated for immediate new housing. While the release of land to developers and changes in the consenting process sped up to fast track new builds the reality is somewhat different with ‘banking the land’ offering it’s own rewards.

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