Land is scarce, so buying some is a top investment strategy, right? Well, it's not that simple. How does it compare to buying another tangible asset like gold? Let's find out.
Investing in land and buying gold are both great ways to diversify your portfolio but it’s important to make an informed decision before you do either. 🧐
Land investments can be lucrative, especially in countries where there is a growing demand for housing or offices. Land investment companies are now buying land to develop as a way of mitigating climate change, too.
The UK, for example, has been a favorable place to own and sell land since the 2008 financial crash. However, it is a competitive marketplace, and only certain types of land are suitable for development. Similarly, gold can serve as a great safe haven asset and a long-term savings method.
So is buying land a good investment? Or are you better off sticking to gold? 🤔
The potential of land investment
🚜Investing in land, particularly agricultural land, has gained traction among investors seeking long-term growth and stability.
For example, the UK's agricultural sector has a strong track record of resilience and consistent returns. Research by the specialist property management financial and investment advisors, Savills, found that the UK’s environmental objectives are driving a demand for farmland.
There are several benefits to investing in land advantages, including:
- Appreciation potential Land, especially in strategic locations, has the potential to appreciate significantly over time. For example, farmland value in Brazil has gone up 45.2% in 2022. Urbanization, infrastructure development and population growth can drive up land values.
- Passive income from agriculture Investing in agricultural land can provide a stable income through various agricultural activities. Leasing the land to farmers or engaging in agricultural ventures yourself can generate a steady cash flow. Overseas farmland can involve higher risks, but it can also offer greater returns, with some crop types in certain areas yielding investment returns of up to 12%.
- Potential tax advantages UK farming estates commonly pass free of inheritance tax.
Advantages of investing in gold
🪙 Investing in gold offers numerous benefits, making it an excellent choice for long-term savings and wealth protection. Here’s why gold should be a part of your investment strategy:
- Hedge against inflation Gold prices often rise when the purchasing power of fiat currencies decreases due to inflation. By investing in gold, you can offset the loss in your cash’s purchasing power.
- Portfolio diversification Gold can effectively diversify your investment portfolio. Its low correlation with stocks and bonds helps spread financial risk, providing stability in turbulent economic times. 💼
- Wealth preservation Historically, gold has increased in value over the long term, making it a reliable way to store and protect your wealth.💰
- Liquidity and global acceptance Gold is highly liquid and easily bought or sold in various markets worldwide. If you store it with GOLD AVENUE (for free!), we’ll even buy it back from you with a 0% commission at any time.
Investing in gold not only protects your wealth from inflation and economic uncertainty but also serves as a reliable long-term savings strategy. Secure your financial future with gold today.
Disadvantages of land investment
While land investment offers numerous advantages, it is essential to consider potential drawbacks and factors that may impact your investment, too. Some disadvantages of land investment include:
- Illiquidity Land is very illiquid compared to gold. Selling land can be a time-consuming process, requiring extensive paperwork and negotiations. Investors should be prepared for long holding periods.
- Capital intensive Investing in land typically requires a significant upfront investment. Whether you choose to purchase agricultural land, raw land, or vacant land for development, substantial capital is necessary to acquire the land and cover associated costs. In contrast, gold offers a much easier entry point for starting your savings. You need significantly less cash to begin investing in gold, with opportunities to start for less than £100.
- Market volatility While land values tend to be more stable than other assets, they are not immune to market fluctuations. Economic conditions and changes in government policies can influence land prices, potentially impacting investment returns.
Disadvantages of physical gold
Like any investment, there are some disadvantages to consider.
- Storage and insurance costs One of the main drawbacks of investing in physical gold is the associated costs of storage and insurance, both of which can be expensive. Unless you choose our secure free storage solution for both gold bars and coins.
- Transaction costs When buying physical gold, you may encounter hidden transaction costs such as dealer premiums, shipping fees, and assay fees. At GOLD AVENUE, all of our pricing is transparent. There are no hidden costs. You can find the price breakdown for each product on our website, so what you see is what you’ll pay.
- Lack of income generation Unlike stocks or bonds, physical gold does not generate income in the form of dividends or interest payments. It solely relies on price appreciation instead. That’s why most people invest in gold long term.
Factors to consider when investing in land
There are several critical factors to evaluate before jumping into the land investment to try and maximise your returns. When investing in land you should consider:
- 🗺️Location and accessibility The location of the land can be crucial. Look for areas with strong growth prospects, such as regions experiencing population growth, infrastructure development, or an increased demand for housing. Accessibility to amenities, transport and local towns should also be taken into account.
- Land use and planning permission Understanding the land's current and potential uses is essential. Do your research. Speak with local planning offices to determine if the land can be used for residential, commercial, agricultural, or mixed purposes. Consult with local authorities or seek professional advice to navigate any restrictions or development opportunities.
- Soil quality and agricultural potential For agricultural land investment, assessing soil quality and agricultural potential is paramount. Conduct soil tests and consider factors such as fertility, drainage, and suitability for different crops. Engaging with local farmers or agricultural experts can provide valuable insights into the land's productivity.
- Environmental considerations Evaluate any potential environmental risks, such as flood zones, contamination, or protected habitats. Environmental consultants can assess potential liabilities and ensure compliance with environmental regulations, but these will need to be factored into your investment.
- Foreign ownership restrictions If you’re looking to buy land abroad, some countries have ownership restrictions. These can include limits on the amount of land you can hold and pre-emptive rights to an outright ban. Amongst the most restrictive countries in Europe are Bulgaria, Hungary, Latvia, Norway and Switzerland. The UK and Ireland have far fewer restrictions.
Land vs. Gold: Practical Tips for Long-Term Investments
Deciding whether to invest in land or gold depends on your personal situation, but both have potential as long-term investments.
Land Investment:
- High costs and risks Investing in land typically requires significant upfront costs. You need substantial capital to buy land and cover associated expenses like maintenance and taxes. Additionally, land investments come with risks such as market fluctuations, regulatory changes, and the physical upkeep of the property.
- Potential returns Despite the high costs, land can offer impressive returns. From 2002 to 2022, land investments showed a 10% compound annual growth rate, with some agricultural activities yielding up to 12%.
Gold Investment:
- Affordable and stable Gold is a more affordable investment with a lower entry point. You can start investing in gold for less than £100, making it accessible for most investors.
- Price appreciation Unlike land, gold doesn't generate returns through rental income or dividends. Instead, it relies on price appreciation. Historically, gold has maintained its value and even increased over time, especially during economic downturns.
- Easy to buy and sell Gold is highly liquid and can be relatively easily bought or sold whenever you need cash. This makes it a convenient option compared to land, which can take longer to sell.
Ultimately, while both land and gold can be valuable long-term investments, gold offers a more accessible and flexible option for those looking for stability and ease of entry. At the same time, land can provide unique opportunities for development and income.
Evaluate your financial goals and risk tolerance to determine which investment is right for you. 😉
