Land Banking

What is land banking?


Land banking refers to the purchase and holding of land assets in areas that are expected to undergo growth, as part of an investment mix or business holdings. Quite often, property developers purchase blocks or parcels of land and hold for future re-zoning or development purposes. Investors may purchase and hold land, complete the Development Application process with council, and then sell the block and DA to a developer. This often involves properties with high appreciation potential, usually at the outskirts of cities and metropolitan areas where there is the opportunity for growth as the population expands.

Who can land bank?


Anyone can engage in a land bank strategy. They will be approaching it as an investor, looking for growth and a future sale; or as a developer, as a future project.

Why land?


Land is assumed to have an unlimited life. It doesn’t depreciate in value generally, instead usually increasing in value as the area around it develops.

What do I need to think about when purchasing land for land banking?

1. Location. Location. Location.

This should be the starting point for all and any discussions around any property purchase. Local amenity, schools, libraries, public transport, shopping centres, hospitals, universities, daycare facilities – what is around that makes the area livable?

2. Zoning

What does council have planned for the area? What are you allowed to do with your block? There is no point purchasing a 10 acre parcel on the outskirts of the city as a land banking holding, if you can’t do anything with but farm on it. Check your zoning with council.

3. Easements

What are they, where are they, how will they impact your future use of the block?

4. Streetscape changes

Who owns the land around you, what are their plans? If the government puts in a new school or hospital, or a developer owns a 100 acre parcel that backs onto your property – what changes are in store for your street? Will it need to be widened? Will traffic lights or a roundabout be installed? These are the things you need to consider.

5. Infill sites

Has the land previously been used as a tip of some sort? Were there old farm buildings that were knocked over and built upon? Was the block a former military camp? What’s under the soil that might cause you issues?

6. Transport

What transport options are available now? What options are on the horizon with the government? If you are holding land for the purposes of on-selling it, liveability is your best selling point. Think about the options available for future residents – they are the people buying from the people who are buying from you.

7. Local amenity/community hubs

What is available to the community? This could be things like public swimming pools, local libraries, and shopping centres. All the things that make a community liveable.

What professional advisers should I speak to when considering a purchase of land to hold?


Engaging professional advisers when considering a land banking investment is a must. Speak with your financial planner and tax accountant to understand if land banking is an investment strategy that suits your portfolio and personal risk profile, as well as your asset allocation spread. Speak to council to understand their current town plan, when it is to be reviewed, and what their thoughts are for the future of the area. Speak with local real estate agents to understand the local demographic as it currently exists, and whether other landholdings are being purchased with a buy and hold strategy. Consulting the state government’s overarching plan can help inform purchasers for regions slated for growth through capital infrastructure investment and regional redevelopment (think areas like the Cairns Esplanade re-development, the Howard Smith Wharves development in Brisbane, and the Barangaroo precinct development in Sydney).

What types of properties can be land banked?


Look for value in the land, where supply is low, but demand is high. Properties that provide multiple access points along with access to existing utilities, can help make the process more manageable in the long run.


Do I need council approval to land bank?


No. Council approval comes into play when you want to develop the land or build a structure on it. Council (and your neighbours!) will likely have expectations around how the land is maintained – lawns regularly mowed, fences in good repair etc.

What risks are involved with land banking?


As with all developments, there is risk involved. Land banking strategies come with the usual property risks:


  • Interest rate risk
  • Rental vacancy risk (if there is a leasable structure on the property)
  • Natural disaster risk
  • Market risk
  • Personal/Company liquidity risk
  • Gearing risk


However, a land banking strategy comes with a few additional risks:


  • Re-zoning risk
  • Development application risk
  • Capital growth risk
  • Investment time frame risk


Land banking is generally a long term commitment. DA’s and re-zoning aren’t achieved overnight, and the boom of regions/suburbs happens incrementally until it reaches its peak.

Don’t be afraid to chase your dreams; let us find the solution to fund your project so you can make your mark!

Is there a minimum land size to make land banking worthwhile?


This comes down to what your intentions for the land are. If you are buying an existing residential house that happens to sit over two titles, you want to be looking at achieving a minimum area of around 400m2 for each block. If you are looking at doing a full master planned community, then you’d be looking for something a little larger…

When you are considering a block, there are a few things you should think about for the block itself:


  1.    The size, shape and orientation of the block
  2.    Any sizeable trees, or trees that may have restrictions over their removal
  3.    The block topography
  4.    Site accessibility
  5.    Are there existing dwellings? Will they require initial work to make them usable? Will they require ongoing management? Do you really want to have tenants?
  6.    What utilities are already linked up to the block?

How do I find out zoning requirements for land banking?


Council is your first port of call for all things zoning. That said, it’s an excellent idea to engage a town planner who can talk you through the town plan, zoning requirements and limitations of the proposed block.


Where can I get funding for land banking?


We provide funding for the purchase of land, for buy and hold land banking strategies. You can contact us to find out more!

Do I have to make monthly repayments on my loan for land banking?


That depends on who your lender is and the funding arrangement they have in place for you. When looking at a funding arrangement, it’s important to understand any limitations on the facility or any covenants or requirements the lender has placed on you. It’s a good idea to have this conversation upfront, so you know what to expect. Call us to discuss your plans.


What can I do with land I have banked?


There are a number of ways to generate a profit from a parcel of land. Your land can be improved through the development of residential or commercial structures for sale or lease. It could be used for tourism ventures (like Air BnB or glamping), could be rented out for tiny home dwellers, or small co-op farming. If there is a residential house on the property, this could be rented out.

Land is a relatively hands-off asset. There are few costs for maintenance and upkeep and ongoing costs are often only rates and public liability insurance.

You may choose to develop your block yourself, sub-divide it into multiple lots, or sell it to a developer.


What should I be aware of when thinking about land banking?


Being rushed into a decision, or failing to complete your due diligence on a property can cause significant financial impact. Taking the time to complete your research, talk to local experts and your financial advisers, and ensuring that you have a solid plan and the determination to see the investment through will go a long way to ensuring the investment is sound.

Summing up


“Buy land, they’re not making it anymore” – Mark Twain

Why Choose IBN?

At IBN, we work closely with our panel of property development lenders, to move quickly on your loan application. We understand that ‘time is money’ and we make the loan process as seamless as possible. Our experienced staff assist you every step of the way with frequent communication on the loan progress.

We present options that others didn’t know existed

We search for solutions and enjoy the challenge of complex loans

We understand the complexities and requirements for a property development mortgage application.

We explain our cost-structure from the outset so that you know what to expect.

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