With their decades of experience in all things real estate, Seeff takes a look at what’s involved with buying vacant land.
A decade or more ago – when vacant land was more plentiful and building costs were lower – it was seen as extremely good to have land as an investment.
Once you’d paid off your land, you’d build a home and find yourself on the property ladder without having broken the bank. These days, however, there is less vacant land available than there once was and building costs have risen exponentially. This means that would-be vacant land investors need to do their homework carefully before signing on the dotted line.
The most important part of doing your homework involves finding the right property. Most of South Africa’s popular suburbs are already densely populated and it can be tough – and expensive – to find vacant properties in the right area.
A great way to make vacant land investment work for you is to work with a property practitioner to pinpoint an area that’s about to become popular. Identifying such an area would mean potentially seeing massive growth on your investment over the medium and long term.
The list of lower costs starts before the land even becomes yours. If the plot of land you’re buying costs less than R1 000 000, you won’t have to pay transfer duties on it. If the value of your land is higher, you’ll still pay a much lower sum for transfer fees than you would have if you were buying a home. The flip side of this coin is that it is often more difficult to get bank finance, as land is considered to be a higher risk than a developed property.
The reasons for banks taking this view include the fact that there is no immediate possibility of a rental income stream and there is a risk of capital loss if property in the area does not appreciate in value.
No matter where you’re buying, vacant land will be cheaper than a home. This is not to say that vacant land will always be cheaper than property in another area, but once you’ve chosen where you want to invest, you’ll almost always find land to be priced more affordably than homes in the area.
For example, let’s look at St Francis Bay Village. For R740 000, you can buy a 1 790-square metre plot in a prime position, just up the road from the well-loved Bruce’s Beach and a stone’s throw from all the amenities in the village. If you’re looking for a ready-built home in the village, you’re likely to pay at least R4 000 000. Buying vacant land gives you the opportunity to custom-build your dream home – or sell the land again in several years to make a return on your investment.
Q: What type of land is the best investment?
A: The rule of buying vacant land is the same rule that applies if you’re buying a home: location, location, location. Buy your vacant land in the best area possible. This way, whether you decide to resell the land or to build on it, you’ll have a good chance of making a great return on your investment.
Q: Do you pay more rates on vacant land?
A: No. The rates you pay on vacant land will be less than the rates you pay on a developed property because the overall value of the land is lower. However, you’ll still have to pay for services like sewage and rubbish collection.
Q: Why is land the best investment?
A: Land can be the best investment for those looking for something less risky than the stock market. It is an adaptable investment that requires little engagement from its owner.
Investing in vacant land for sale can be a savvy investment if you find the right property at the right price. Speak to one of Seeff’s property practitioners for additional real estate investment advice.