It's not surprising that over 20% of the UK's top 100 richest people are landowners and have made substantial profits from land banking.

Until recently though, it was hard for the smaller investor to take advantage of land banking, now a number of companies have opened up this investment to a wider audience.

What is Land Banking?

Land banking simply involves the acquisition of land, which does not enjoy planning consent, in advance of expanding urbanization. The price of an open space plot, not immediately subject to urban development pressures is low. When urban expansion occurs the land rises in value when planning consent is granted.

The way to make big capital gains in land banking, involves buying land in specific areas in the hope of future development.

Advantages of Investing in Land

Land is real. Unlike shares, land for sale is tangible - it can be visited, seen and walked upon.

Land is a finite resource. The key to land investing is to buy in countries with a shortage of land and a growing economy and population that will make prime land locations rise in price as they are developed.

Land is a cheap method of investment in comparison with other forms of investment such as property.

Land increases in value consistently year after year in many countries, due to demand outstripping supply and from land gaining planning permission to have houses built on it.

Land Location is the Key to Profits

To make money in land banking, investors need to invest in the right location at the right time. One of the best locations in the world is the UK, with an average growth rate of 926% over 20 years. This is the average increase in land prices, but with careful selection, many investors have made much more.

The equity markets, banks, bonds, precious metals, antiques, art and foreign currency have all had their highs and lows, but land has continued to rise in value, and nothing shows that this will slow down.

The Government's independent research has highlighted that the UK is suffering from an acute housing shortage primarily caused by immigration, life expectancy and the rise of single person households.

The Office of the Deputy Prime Minister, John Prescott, has responded by changing planning policy, allowing the promotion of more land for residential development.

Keep in mind 926% is an average of all land, but with careful plot selection much bigger gains can be made.

How you can Benefit from Land Banking

The way to make big capital gains in land banking, involves buying land in specific areas in the hope of future development and many companies are offering the following services:

1. They aim to identify prime undeveloped land that can be used for future development, and buy strategically placed land that has not yet received planning permission.

2. These plots are then sub-divided into affordable plots and offered to investors.

3. The company then promotes the site to gain planning permission.

4. Once planning is achieved, all parties are contractually bound to sell their plots at full market value, and within a set timeframe, giving a maximum return to all investors.

If you want solid long term capital gains then you need to know more about land banking.