“Buy land, they’re not making it anymore.” This well-known adage, often credited to Mark Twain, is familiar to many. It's something we understand instinctively yet bears reiterating: land is a finite resource. Once developed, adapting land for alternative uses can be both expensive and challenging. On the other hand, vacant land is frequently constrained by either natural features or regulatory barriers which hinder its development. Usually, in a standard market cycle, land is the first to experience a downturn and the last to recover, but amidst the current economic conditions, the appetite for land and development remains strong. For developers and builders, understanding the factors that drive a heightened demand for land is essential.
The basic economic principle of supply and demand plays a significant role in the land market. Let’s take the Sunbelt region where nearly half of the U.S. population resides. Outsiders, attracted to more affordable living costs and the appeal of lower-tax states, have enticed builders and developers to outbid each other for a limited supply of desirable locations for housing, commerce, and industry.
Low Volatility and Investment Trends
Land is often seen as a safer investment compared to other volatile markets, attracting more investors, and thereby increasing competition and prices. Land sale trends generally demonstrate stability or a gradual increase over time, seldom showing a decrease in the long term. The steady growth in land investment, which offers a secure method for wealth preservation, has made it a favored option among many of the nation’s wealthiest people. This situation, however, is a source of frustration for developers who find themselves competing against all-cash buyers.
Zoning Laws and Regulations
Zoning laws and land-use regulations restrict the availability of land for certain types of development. These regulations are intended to manage growth but can also limit the supply of developable land. In areas with strict zoning laws, the cost of land can be significantly higher due to these constraints.
The Impact of Technology and Work Trends
Population patterns are shifting. Remote work and technology companies have also influenced land prices. Areas that offer a high quality of life suitable for remote work have seen an increase in demand for land. This shift in work culture has opened previously less sought-after areas for development, pushing land prices higher across the real estate spectrum.