Land speculation involves buying real estate in the hope of increasing its value, often involving risky purchases. Historical land speculation occurred in the US during colonization and westward expansion, with some attempts to regulate it. Proper research can turn land purchases into investments.
Land speculation is a financial activity that involves buying real estate in the hope that the price will increase. Most land purchases can be better termed real estate investments, as land tends to appreciate in value over time due to factors such as scarcity. Speculating on land generally involves the purchase of real estate that may lose value, and often refers to activities that took place in the early history of the United States. As vast tracts of public land were available throughout much of United States history, land speculators sometimes purchased large parcels with the specific intention of withholding them from the market. This very act of land speculation could raise prices, but it also sometimes had detrimental effects.
Real estate is usually a valuable and stable commodity, so buying land is not usually considered speculation. If an investor does the proper research to understand the local market, a reasonable expectation of return can be obtained. Land speculation generally involves risky purchases, either due to lack of information or an inherently unstable situation. Modern land speculation can occur if an individual buys land without doing the proper research or buys low-cost properties that he expects to appreciate quickly due to outside forces. Activities like these can result in a general loss of money, so they can be seen as speculative.
Historical land speculation has typically occurred when large amounts of land became available for private purchase. This type of situation has happened in the United States several times, beginning with the original colonization of America by the British. Many settlers bought large tracts of land with the speculation that they could earn income from the purchases. In some cases, these land purchases would be nullified by disagreements between colonies, or in later cases between states, and the speculator would be left with nothing.
During the westward expansion of the United States, more public land was opened up to private speculation. The government made some attempts to rein in potentially damaging speculative behavior, such as farm acts that allowed treaties to be awarded to the people who actually occupied them. Even after such laws were enacted, land speculators still bought large amounts of land to intentionally withhold from the market. This sometimes resulted in large profits for the speculator, although in many cases the land would simply go unused.
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