http://www.wealthandwant..._Land_Appreciation.html

Wealth from Land Appreciation

We are in the habit of thinking of land and buildings together as "real estate" and forgetting to notice that land and buildings are fundamentally different. Buildings depreciate, every year. The land was there before we were born, and will be there long after we're gone, while buildings come and go. Land appreciates, as a result of our common investment in services and infrastructure; as a result of population increase, as a result of technological innovations (e.g., think of the impact of air conditioning and fiberglass boats on land prices in the American south) and as a result of the natural amenities in the area. None of these are something any of us can rightly take credit for, or claim rightly as our private treasure. Materials for buildings are readily available and one can be substituted for another; nothing can be substituted for land! When demand for buildings increases, so can the supply of building materials. But land is different, and when demand rises, as it must if population increases, its value increases because its supply is fixed.

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http://www.wealthandwant..._Land_Appreciation.html

@pariah..some readers find it easier when all content is on the same page as opposed to opening another link that redirects to another site.

Well, thats the thing about land! it's one of those few things we can buy that then appreciates in value without any of our intervention.(the only other thing I can think of is stocks).
The thing about buying and holding is that it is a waste unless the value at purchase appreciates beyond the future value of the present sum.

I think with growing urbanisation in Kenya this is the situation but not for long. Eventually some of this land will be overpriced and not worth it, also with more people occupying less ground space and ever changing human preferences land will either just NOT be affordable in the cities and or those who will pay the price for it will have to develop it to sweat out their investment.
That situation is already visible in the upmarket. Few can afford to sink 10m on a plot in Kileleshwa then sit hoping it will be 20m in a few months time. The interest costs on 10m is quite high, the returns from the development once finished is even higher.

Speculation is now left to the low risk takers, those lacking finances or innovative entrepreneurial skills.

If you are holding land for over 3 yrs you better have a game plan. Plant trees if thats all you can do but at least sweat the asset since it is a line item on your balance sheet with no returns except the future profits you are anticipating when you sell.

Something about land and investing in it. We have two categories of investors largely: speculators and cashflow investors. Speculators buy land / plots and sit on it awaiting the same to gain in value. Of course land in Kenya naturally gains in value due to forces of demand and supply and it gains massively from infrastructure and common services development. This is only sustainable if the above factors (some or all) hold.

Smarter investors take it another level and add value to the plot by way of development and they gain in both ways, value rise as aforementioned plus cash flow arising from the said developments in form of rent. The later is sustainable in the long term especially with demand for houses for rental purposes always on the rise and rent rising significantly over a period of time.

Of course speculators make their money. But the current situation is getting tricky by the day. Notice that getting plots in the range of 500k is becoming impossible in relatively prime areas (outskirts of Nairobi), unless u go to Kangundo road and past Athi River along Msa road. This effectively means most people cannot afford them unless they acquire loans from banks. If u look at the rates of interests for loans, then the situation is not so rosy.

I think as long as God is not creating more land, the land will continue to appreciate. Unfortunately this appreciation is not reflected in small towns or farming land. For instance I bought an acre somewhere 153 km from Nairobi, which is very fertile at 150k and 5 years down the line, the land around is costing about 180-200k. On the other hand, a plot i bought in juja at 380k 3 years ago is now fetching more than double the amount.
My greatest fear is for communities whose land is held as trust since the trustees continue to sell the land while the community doesn't have titles. This is what triggered MRC uprising in the coast where foreign investors have land and titles while the natives are considered as squarters