Holding on to land for extended periods, leaving it idle anticipating capital appreciation and future development, isn’t a new investment approach. However, its repercussions are drawing more scrutiny, with long-term vacant homes and undeveloped land increasingly conspicuous in the housing crisis.
These involve purchasing underdeveloped plots of land with the hope future catalysts, such as rezoning for residential use, will boost their value. However, this speculative gamble often doesn’t pay off, leaving the investor with an illiquid asset that undercuts their wealth creation efforts for years.Not discounting those unfortunate situations, the practice has broad secondary flow-on effects.
Land-banked properties also deprive the local economy of significant financial inflows and hinder economic growth.By keeping properties off the market, opportunities for sales, rental income, and accommodation for potential renters diminish. This has a ripple effect – local tradespeople and service providers miss out on potential work, and the revenue that could have been injected into the community is lost.