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  1. #1
    Junior Member
    Join Date
    Jun 2012
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    4

    Default Estimated average growth or return on bare land investment

    Newbie looking for some advice from those with experience here...

    I'm struggling to find any useful data on how much bare land appreciates over time. Can anyone point me to some useful info?

    For example some average annual investment return, or an index chart or something like this (which doesn't consider land without a house on it): https://www.rbnz.govt.nz/statistics/...e-price-values

    Or is it possible to see how many previous owners a section has had, and what the previous sale prices have been?

    Basically I'm thinking of buying a residential section and holding it for a few (3-5) years. But want to compare that against if I just held shares for the same period.

    Cheers

  2. #2
    Permanent Newbie
    Join Date
    Mar 2010
    Posts
    1,588

    Default

    I had heard 7-8% per annum on average but I don't know what time period that covered, so no idea.

    I don't think there is a guaranteed appreciation rate, not that I know of anyway.

    If we have recently had 30% per annum if this was to average out you would expect negative or no returns for the next few years.

    Hard to value as there is no income stream only rates to pay. Pure speculation, but based on the recent past and the actions of the RBNZ over the last 30 years possibly worth taking a punt. On the other hand interest rates have been a driver for property prices and they are expected to go up over the next little while so could decrease demand or affordability of property, unfortunately I can't see into the future.

    Other factor, location, location, location.

    The bright line rule extends to 10years now so tax to pay on any profit if sold within 10 years and you didn't build a house to live in, on it.

    I should not give advice as I do not have enough experience, although every property I have looked at over the last 10 or so years would have worked out OK if I had taken a punt, which I didn't.

  3. #3
    Member
    Join Date
    Feb 2003
    Location
    , Christchurch , NZ .
    Posts
    177

    Default

    Location is truely important - had a section in Governors Bay for well over 10 years - took over a year to sell and made no profit

  4. #4
    Member
    Join Date
    Feb 2003
    Location
    , Christchurch , NZ .
    Posts
    177

    Default

    Covenants will also be a factor in many cases

  5. #5
    Member
    Join Date
    Aug 2006
    Location
    Christchurch
    Posts
    416

    Default

    Good question. A property is made up of land and improvements, totaling the capital value. Over time, the land appreciates, and the improvements depreciate. So, most of the property's capital appreciation is in the land, not the improvements.

    Bear in mind that with vacant land, there is no income. On the other hand it is cheaper than a property with improvements. It depends on the relative value of the improvements and their rental value as to how much a rental income will add to your ability to service the investment. And, banks will only lend 50% on vacant land as against more on improved property. For land you need to be in an area that is growing so that the value grows too. Although to confound that I've seen that on the West Coast of all places land values have doubled in the last four years or so.....I think there are people sick of the cities who realize they can work remotely these days so why not relocate to somewhere nicer.

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