Land speculation is a financial activity that involves the purchase of real estate with the hope that the price will increase. Most land purchases can be better referred to as real estate investment, since land tends to appreciate in value over time due to factors such as scarcity. Speculating on land typically 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 there were vast expanses of public land available throughout much of the the history of the United States, land speculators sometimes bought up large parcels with the specific intent of withholding them from the market. This very act of land speculation could drive prices up, but sometimes had detrimental effects as well.
Real estate is typically a valuable and stable commodity, so purchasing land is not often thought of as speculation. If an investor does the proper research to understand the local market, a reasonable expectation of return can be obtained. Land speculation typically involves risky purchases, either due to a lack of information or an inherently unstable situation. Modern land speculation may occur if an individual purchases land without doing the proper research or buys inexpensive property that he expects to appreciate rapidly due to external forces. Activities such as these can result in an overall 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 original colonization of America by the British. Many colonists purchased extensive tracts of land on the speculation that they might be able to derive 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 to private speculation. Some attempts were made by the government to reign in potentially harmful speculative behaviors, such as homestead acts that allowed tracts to be granted to individuals that actually occupied them. Even after such laws were enacted, land speculators still purchased large quantities of land to intentionally withhold from the market. This sometimes resulted in great profits for the speculator, though in many cases the land would simply go unused.
