Investing on overseas land has once been dominated by the rich, but this has already been stopped by landbanking companies.
These firms purchase huge parcels of undeveloped land, which they believe to possess some development potential. A particular portion of the land is then kept for private purposes, while the rest are divided into smaller parcels to be put on sale for individual investors.
The next goal is to attract more developers and for the company to sell the parcels on behalf of the individual investors.
There are several companies that offer lands in Western Canada like Edgeworth Properties, while lands in Britain are being managed by Profitable Plots. Usually, a parcel’s minimum investment ranges from $10,000 – $15,000.
Sizeable payouts are the prime feature of these projects that lures investors. Several firms also guarantee about 20 percent in returns.
Edgeworth Properties Vice President (Asia Pacific) Michael Yap said, “Land is a hard asset that will always appreciate in value with time and development”.
Mr. Yap also added that Edgeworth Properties choose land located near developed neighbourhoods, and has the prerequisites for population growth and sustained economic.
The estimated time given by landbanking companies to customers in the length of time that they will have to wait before the land is purchased is not definite. This suggests that waiting longer than seven years is still probable.
Yet, detailed information about the land being offered is provided by nearly all of landbanking companies so that investors may have an idea about the land that they are buying. However, investors must always be open to some risks.
Director of GYC Financial Advisory William Cai said, “The first thing that comes to my mind is liquidity – landbanking does not provide much liquidity”.
“As there’s a lack of liquidity, it is hard to say if investors are overpaying for the piece of land in the first place”.
Exchange rate fluctuations are also a risk, Mr. Cai added. Disputes between individual investors and the company can also get worse due to the fact that landbanking is unregulated.
But in spite of the probable problems, Mr. Yap said that Asian response has been “very encouraging”.
Edgeworth Properties’ lands are sold in the Philippines, Taiwan, Singapore and Malaysia, with Singaporeans comprising around 63 percent of the buyers.