Buying land at “hope value” auctions is an enticing prospect for purchasers looking to invest in property with the potential for future development.
“Hope value” means the land could become much more valuable if planning permission for buildings like homes, shops, or factories is granted, leading to spirited auction bidding driven by the hope of the land’s value increasing, but with high expectations come certain risks, and investors need to be savvy about their approach.
In this discussion, we explore what “hope value” entails, including the opportunities and risks, and how to strategize when buying land at auction banking on future development.
The Factors Affecting Land Prices
Land prices fluctuate widely, influenced by location, planning status, and designation such as Areas of Outstanding Natural Beauty (AONB) or the quality of agricultural land. Savills reported at the end of 2023 that in the UK, prices for agricultural land ranged from about £5,600 per acre for pasture to £11,000 for top-quality arable land.
Garden land also holds value, with “The Grass People” finding in their study of some 50 UK locations that the average price was £1,526 per square meter.
Woodland prices typically range from £3,000 to £12,000 per acre, while land with planning permission might fetch any price buyers are willing to pay, sometimes exceeding a million pounds an acre.
Land hoped to gain in value is often near existing properties and could be combined with them for a more extensive development. The purchase would be made in the hope of securing planning permission to replace a current dwelling with several new homes using the adjacent parcel of land.
Alternatively, there are parcels of land that are separate from any property and have served various purposes over time. One such example is Higher Bal, St Agnes listed by Lodge and Thomas. This land, part of an AONB and an Area of Heritage Coast, used to be a vegetable garden with a garage (now removed).
An interesting point in the listing is a failed 1990 planning application involving the adjacent garden, rejected by local planners due to conservation concerns. Would-be buyers of such land should engage in thorough research and potentially consult with planning specialists before deciding to buy.
Overall, considering the purchase of land at auction with “Hope Value” is a game of weighing potential gains against possible pitfalls.
The Benefits of Acquiring “Hope Value” Land at Auction
“Hope Value” indicates the land’s development prospects which could lead to a substantial increase in its value. Such potential makes for a competitive auction and a chance to snag the land at a price below its future market value if the development possibilities are not fully recognized by all bidders.
The auction process is notably clear-cut, giving buyers the chance to do their homework before bidding and providing assurance that they have all the relevant information.
Compared to the usual property sales, auctions expedite the transaction, leading to a faster ownership transfer post successful bidding.
The Challenges of “Hope Value” Land Investments
Investing in “Hope Value” land is a gamble since development permission isn’t guaranteed, and obstacles like zoning laws, environmental concerns, and local opposition could surface.
Auctions can be thrilling, but bidders may get carried away and offer more than the land is worth. It’s vital for investors to stay within a pre-set spending boundary based on comprehensive research and financial realities.
The lack of detailed information on certain auction properties can be problematic, making it tough to gauge the land’s potential and risks. Extensive due diligence and expert advice can help reduce this uncertainty.
Committing to an auction purchase often means paying a deposit and covering additional costs. Buyers must be financially prepared and recognize the consequences of failing to complete or defaulting on the deal.
Understanding the “Three Hopes” of Land Auctions
In summary, purchasing land at auction with “Hope Value” might present rewarding development and value appreciation chances. But, like any investment, it comes with potential setbacks. Buyers should proceed cautiously, do their homework, and weigh up the risks carefully before committing to a land purchase.
