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Saw an ad for Profitable Plots Company Ltd, the UK land investment company on the back of a bus in the 1 Utama area the other day and thought that I would follow the trail. What caught this Anglophile’s attention was the funky Union Jack emblazoned bus and the rather catchy and Brit-sounding name. I thought to myself – another land-banking company comes to Malaysia, this time from the UK and put it on “my must check out” list.

PP acquire strategically positioned tracts of raw land that hold “strong prospects for future development”. These sites are reviewed with their planning experts who work closely with local regulators to create notional plots for sale to retail investors. According to PP’s website, they have offices in the UK, Canada, Malaysia and Singapore but no other information was provided about the company’s background or management.

I guess we’ll have to wait for more information to be made available before we can tell how viable is the company and their business.

In my online research I uncovered info about other land banking companies like Walton (Canadian farm land) and Royal Siam Trust (beach front land in Thailand). It seems that investment in land-banking schemes has been a “hot potato” amongst the expat community, many of whom have been approached to take part in these schemes. An interesting post by the Marketing Director of Royal Siam Trust(RST – more on this company later…) in the forum of an expat website gave further insights into this investment area, particularly about RST, Walton, PP and also the Thailand land market. Some of this useful info is reproduced below (in italics with emphasis added) with some comments of my own:

RST on the concept of land banking:

The concept of owning land and selling it for profit is as old as the hills. Syndicated land banking, as per RST, Walton and Profitable Plots (amongst others) is a relatively recent departure (about 15 years) and merely makes large areas of land available to everyday investors in small unit sizes. Much like Unit Trust funds (mutual funds) did for shares etc. So the concept is relatively new but does it work? Well that depends on the land that you buy. Clearly, we can see that land and property prices tend to rise steadily over time (perhaps more steadily than shares) but remarkable gains only come along when land becomes scarce or planning permission is obtained on it and it becomes interesting to a developer who is quite prepared to pay more than it is worth…

RST on capital appreciation of land in the UK and North Wales:

Land in UK over the past 20 odd years has increased steadily. Land in inner cities, where planning is harder to get has risen about 1000% in value, whereas land in North Wales, where local authorities have been keen to grant planning permission in order to attract relocating businesses who would employ local labour and bring prosperity, has risen some 2600% over the same period! 

According to Profitable Plots (PP)’s website, there is currently a severe housing shortage throughout the UK due to:  

– an increasing population and longer life expectancy

– an increasing number of single occupant households 

– increased mobility and migration of people throughout Europe  

All of these factors place significant pressure on existing and future housing needs in the UK.  

RST on the investment risks:

Land banking tends to be sold more by a suggested promise of planning being able to be obtained and the quantum leap in the price that follows, rather than in terms of steady growth with the possibility of a successful planning application. I cannot comment fully on the issues regarding Profitable Plots but would suggest more research needs to be done as it seems clear that one local authority at least is (or has) seeking to block planning applications on the land that has been acquired.  

Elsewhere I’ve read that PP had bought, sub-divided and re-sold to retail investors a piece of land in Colchester, UK with a suggested potential returns of 600-900 percent but the land had since been ruled as conservation land and therefore unsuitable for development by UK regulators, putting anyone’s who’s invested in a bit of a fix. It is not clear so far what will be the fate of those who have invested in Colchester, although in a separate TV interview with Channel News Asia, their COO had in the past stated that in some cases there may be a possibility of switching over the investment into other sites if it is found that planning will not be approved. If you’re considering investing, it may be wise to get a lawyer to go through the legal documents to make sure you know what your rights would be in these circumstances.  

RST on whether land-banking schemes are scams:

But is this a scam? Why would it be? A scam suggests that you have paid away money but you don’t own any land. PP and Walton both give you a title deed to the plot that you own. This comes from the UK or Canadian land registry and is overseen by a lawyer. You do own the land. Whether you make a profit (and to what extent) will depend on many factors, and growth is perhaps implied but never guaranteed. We can look at past performance and future expectations of growth on a unit trust fund but we cannot guarantee that this will happen. Will we have been scammed if the fund manager loses money for us, I think not! 

In short, just because this is a risky investment doesn’t mean it is a scam. In the case of PP, you get freehold title to the plot which is registered with the UK land registry.

To be continued…

 

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