What Will New Communities Secretary Greg Clark Mean for UK Housing Policy?

The new head of the Department for Communities and Local Government authored the Localism Act, which should please land investors, homebuilders and homebuyers.

Shortly after the May 2015 election, Prime Minister David Cameron announced that Communities Secretary Eric Pickles would be replaced by Tunbridge Wells MP Greg Clark. This provides much to cheer for among investors who seek a UK land investment as Clark has long spoke of the need to release more land for homebuilding.

Indeed, in an official press release from the Department for Communities and Local Government (DCLG), Mr. Clark and MP Brandon Lewis asked all Whitehall departments to “let go of surplus and redundant land and property for new homes - and for town halls to follow suit.” The statement from the new DCLG head urged England’s 326 councils to look at their own land assets and consider selling these public sector lands to private developers such as property fund management organisations. By Clark’s reasoning, public sector land alone could provide 150,000 new homes by the year 2020.

This isn’t terribly surprising, given how Clark is largely credited as the architect of the Localism Act of 2011. This fundamentally altered how land is approved for use changes, now determined by local planning authorities instead of regional planners who held this power prior to the Act. Now investors engaged in a joint venture land opportunity fund can be much closer to the land and the local authorities making decisions to add homes to a community. The devolution of authority is ultimately designed to help alleviate the country’s housing shortage.

What other evidence do investors and managers of property funds have of Clark’s commitment to building more houses at a faster rate? Consider Clark’s statements in the past few years, prior to his current appointment:

• “To be against new buildings and new infrastructure is to be against growth, which is in turn to be in favour of people becoming poorer than they are today - something that should be unconscionable to anyone with a concern for the wellbeing of their fellow man.”

• “We need more houses: for young people; for families; and for older people living - thankfully - longer than they ever have before. It may be convenient to imagine that our population is stable or shrinking, but this is just plain wrong - the fact is that our population is growing.”

• “To fail to provide the houses we need is to condemn today's young people and their children to overcrowding, homelessness and poverty driven by soaring rents and house prices. No progressive should have any truck with a course of such cynical selfishness.”

Indeed, in a May 2015 opinion piece published in the Daily Telegraph ("Why we want to hand power to local people") - a newspaper that has long championed the preservation of green countryside against development - Clark went so far as to say that an overbearing central government in the UK is at fault for the country’s London-centrism. The result, says Clark, is “our cities have lost the ability to thrive along the way…our great industrial metropolises have underperformed.” He contrasts England with Germany, France and Italy, where economic output and populations of non-capital cities are more robust and distributed than in the UK.

What that means is those joint ventures focused on land have more opportunities than ever before to work in partnership with local councils. Their shared mission is to increase the vibrancy of the local economy by providing homes that make living there affordable (the housing crisis hits hardest in central London and the rural areas, ironically enough).

Smart property fund management suggests that investors work closely with local council authorities to identify all types of land that might be suitable for development. This includes surplus public sector land, greenfield, brownfield and all other sources of redundant land. From his statements, it seems Secretary Clark is behind this and will likely respect local needs and nuances.

Investors of any sort, joint ventures or otherwise, should always consult with an independent financial advisor before taking a position in real estate, land or other asset classes.

What is the Position of the Home Owners Alliance Regarding New Home Building?

As many as five million residents of the UK wish to own their homes but don’t. Private sector investors are critical to alleviating the problem.

The name of the UK Home Owners Alliance (HOA) pretty much summarises its mission: this is an organisation that advocates for increased homeownership. Naturally, that includes encouraging strategic land developers to contribute to the nation’s housing stock on a simple economic principle: supply must meet demand if prices are to make home ownership accessible for the citizens of the UK.

It’s an association that has taken a strong position with research to back up what it says. And the collection of data as it corresponds with public policy and trends in UK land investment is hard to argue against:

• 86% of adults in the UK want to own the roof over their heads.

• Ownership rates peaked in 2002 at 69.7%, but are now below 65% and by some predictions will drop below 60% in coming years.

• The “homeownership gap,” the portion of the population that wishes to own but doesn’t, is now 5 million people.

• The average age for first-time purchasers is now 33 and is rising each year.

• This long-term decline places UK homeownership rates within the Eurozone below those of Portugal, Ireland and Bulgaria.

While the fingers of blame point in many directions - Thatcherism and the selling of social homes without rebuilding, the 2008 financial crisis and subsequent stringent lending, the London-centric nature of employment and business in the UK, foreign wealth that is buying up English residential property and distorting the market - the HOA also emphasises some of the less-quantifiable effects. “Many young people are having their dreams, and self-esteem, shattered,” said HOA in a 2012 report (“Death of a Dream”). “Research shows that people are happier owning their own home, rather than renting. Many adults are being forced to live with their parents even though they don’t want to - putting severe stress on family relationships. More limited homeownership makes us a more unequal society. With fewer people building up equity in their homes, fewer will have a big enough financial cushion for old age, putting strain on welfare systems.”

Land developers who work strategically with local councils are on the front lines of alleviating the shortage of homes. These are the private interests driving development, where real asset portfolio investing results in the transformation of under-used land in locales where employers need workers, ideally within close proximity of their workplaces. Of note, there is a noticeable exodus from London to other cities by both younger workers and employers who find land, homes and commercial property more price-competitive and where the quality of life is arguably better.

What do investors in real asset portfolios get from their involvement? The primary driver is individual asset growth, of course. Land and property are historically some one of the greatest engines of wealth development. The characteristics of strategic land include a relatively short timeline for achieving that growth and exiting (if the investor choses) the investment. This is made possible by working with asset portfolio specialists who identify land that is likely to achieve planning authority status changes. With that accomplished, the land is designed and developed with infrastructure (roads, utilities, etc.) to accommodate homebuilders, who then purchase lots and build to suit homebuyers.

Any investment decision involves some risk, of course. The investor should always contact an independent financial advisor to determine the smartest course of action.

What Does Retention of Minister for Housing Brandon Lewis Mean for UK Housing Policy?

The May 2015 election now past, housing policies will likely be kept intact. Given recent progress, that should cheer investors as well as homebuyers.

It’s not at all surprising that discussion about the housing shortage in the UK would turn into a political question during a national election year. And in fact the ideas were flying between Conservatives and Labour in the months leading up to David Cameron's resounding victory in May.

At issue were his various schemes, including Help to Buy, a Help to Buy ISA and various iterations of Right to Buy with social housing. Labour proposed that banks and building societies that participated in the ISA be forced to invest deposits in new housing, which drew criticisms from the right for skewing investments away from free market mechanisms. “Either a housing scheme that a property developer or housing association is seeking finance for is reckoned to be profitable – or it isn’t,” wrote a columnist on ConservativeHome.com.

The columnist further stressed his interests in liberalising the planning system in order to free up supply. Which is precisely what property fund partners, seeking a return on assets, do as a matter of course.

Despite England’s history with social housing, reaching back into the early 20th century, UK land investment forces were the driver of most building throughout the UK. With property funds, individual investors are tapped to buy land and develop it into homes and commercial property. The simple market forces of supply and demand produce housing as needed.

Which is part of why the retention of Brandon Lewis as minister for housing drew mostly praise following the election. The programmes that were instituted prior to May 2015 have begun to show promise, cheering those with real asset funds dedicated to purchasing land for development into housing.

PropertyWire.com, a global property news service, reported one month after the election that Lewis’ first term turned up encouraging results:

• 60,000 affordable homes were delivered in the 12 months prior to the election, up 63 per cent over the prior 12 months (6/2013-5/2014).

• This number makes 260,000 affordable homes built since April 2010, exceeding goals by 16,000 homes.

• The Government has pledged £38 billion in public and private financing, real assets that fund community building and home building to support Britain’s growing population.

• While London alone received a third of those new affordable homes, substantial numbers were also built in Cornwall, Birmingham, Wiltshire, Leeds, Liverpool and Manchester.

As for the ISAs, Lewis predicts the individual savings scheme “will support over a million first-time buyers to achieve their dream of owning their own home.” Clearly, he remains fixed on the programme actualising in late 2015.

Those who invest in property funds already are pushing much-needed inventory onto the market, which readily purchases the homes once built. But due to the overwhelming growth in population and a strong, upward climb in the economy, affordability for younger people has largely been the issue. But with the continued success of Help to Buy, the Affordable Homes Programme, and the promises of the proposed Starter Home Initiative (houses for first-time buyers, built on brownfield land and minus Section 106 levies), younger workers are starting to see opportunity.

So with the continuity of programmes from Minister Lewis, application of real assets by private investors can have a synergistic effect of increased housing stock in the country. Time will tell, of course.

Individuals who invest in land can do so with a sense of duty to country, if they so choose. But all investments need to be considered objectively, which is best done with the counsel of an independent financial advisor.

What Are National Homebuilders Forecasting for Newly-Built Home Sales in 2015?

The continued rise in home prices, new and existing, are incentive enough for developers and investors to build more. Fortunately, more land is available.

The trend-lines are clear: the high demand-low supply pressure on homes in the UK, while variable by region, continues a multi-year upward trajectory of house prices. The Halifax Price Index in June 2015 show a 3.3% hike over the first quarter, when uncertainty over the national election in May somewhat slowed sales.

And of note to investors engaged in capital growth planning and the like, this is not simply due to a low supply of homes in a country that needs to build more. The updraft causing loftier prices and brisk sales is also tied to higher employment levels, overall economic growth, increased real earnings to workers and very low mortgage rates, say Halifax economists.

Nationwide, the juggernaut building society and a big player in UK mortgages, shows that the average price of all types of new-build homes (terraced, detached, semi-detached, bungalows and flats) is now £188,980, up from £177,477 in the last quarter of 2014. Some average prices for new-build homes were higher in 2014, but the 2015 figures show a strong uptick in the years following the 2008 financial crisis (it was £137,062 in the third quarter of 2011). A UK land investment made four years ago could easily yield a good profit now.

What does this say for individuals, institutions and firms who invest through land investment funds? What are the prospects for growth, given the strength of the housing market?

“Supply remains very tight with the stock of homes available for sale currently at record low levels,” says the Halifax chief economist. “This shortage has been a key factor maintaining house price growth at a robust pace so far in 2015.” In other words, just about anything built as well as existing homes that become available for sale will find a waiting market.

But regionally, there are differences. The North of England as well as Scotland and Wales do not see quite the price growth of London and the South East. But what slows development of new homes, where capital growth can be greatest for investors, is the planning process. Driven to local (vs. regional) authorities by the 2011 Localism Act, which created the National Planning Policy Framework (NPPF), local councils now hold the reins on determining what gets built where. That said, many local planning authorities are playing catch-up on establishing plans for their councils, often depending on those capital growth-oriented investors to propose developments that they identify as likely to sell and serve local needs such as to provide housing for the area’s employment base.

One area typically considered controversial is when approvals are given to building on green belt land. Funds invested in such land can achieve significant growth when building is approved; in fact, there was a strong increase in the number of sites approved under the first Cameron government. Between 2010 and 2015, according to a BBC Radio investigation, building on the green belts topped 12,000 homes in some years (prior to Cameron, in the year 2009-2010, only 2,258 homes were built on green belts). The Conservatives have promised to increase the housing supply by 200,000 per year without encroaching on these green fields, but that claim is met with widespread scepticism. Population growth forces building both up and out.

Investors are most interested in property funds when they can perform better than other real assets. That may be possible on brownfield land, but not as often. Where cities and towns need employment is very often to the determinant of where the capital growth investor should put his or her money. Because the majority of councils have yet to develop a master plan, it is incumbent on the planners representing the investors to develop smart development rationales. Very often those investors will also fund requisite improvements to, or expansion of infrastructure to accommodate new homes.

Investors come in all stripes, but understanding the many variables of land and real estate development is not native to everyone. An independent financial advisor can provide an objective look at specific investments as well as how much to weight a portfolio in this type of asset.

UK House Builders Project 18% Increase in 2015 Output: Details and Implications

There certainly are hopeful signs for more houses in the UK. But it’s still short of goal - releasing more land in a faster permitting process would help.

After nearly two decades of inadequate homebuilding, and particularly following the 2008 financial crisis, construction firms are reporting stronger numbers in residential building. It turns out that private strategic land partnerships are playing an important role in this, but a real and necessary surge in new homes will come when one or several conditions change that would allow it.

The year 2015 started slowly, with fewer permits and completions being reported due to uncertainty in anticipation of the national election in May. Once that was past - and the Conservative victory erased worries over a mansion tax - the industry picked up. Surveyed house building firms project an overall 18 per cent increase over 2014, when 141,000 homes were built, which computes to 166,380 homes to be completed by year’s end. Financiers engaged in UK land investment should be cheered by that, but with full understanding that the country should be building closer to 240,000 or 250,000 homes per year in order to keep up with population growth and demographic change.

Another indicator is purchasing behaviours in the construction industry, as measured by the Markit/CIPS survey. It rose to 58.1 in June, eight points above the line that separates expansion and contraction. Even more, 62 per cent of construction industry managers predict increased output by mid-2016, the highest level of optimism in a dozen years.

For investors in alternative investment funds that target specific regions, the National House Building Council provides geographic breakdowns in house builder registrations. They include:

• Eastern England - Builders currently planning 4,318 new homes, a 70 per cent increase in new registrations.

• Northern Ireland - With a 42 per cent increase in registration.

• South East - Registrations are up 47 per cent.

• Yorkshire and the Humber - Registrations up by 33 per cent with 2,223 new homes.

• South West - A 38 per cent increase with 4,486 new homes.

Notably, London’s 5,622 new homes represent a 29 per cent decline relative to Q1 2014. The North East also experienced a 10 per cent drop in 2015 vs. 2014 (Q1 figures).

For investors who prefer working in strategic land (a purchase and development of land that requires planning authority change permission), it’s important to note that critics of the UK’s slow build in residences claim that the UK’s planning system bears much of the blame for failing to meet the critical demand. The Government reforms, devolving authority to local councils with the National Planning Policy Framework enacted in 2012, has helped. But the Home Builders Federation says moving from outline to detailed planning is a bottleneck, frustrating to builders as much as investors (for example, those alternative investment funds’ partners) and ultimately to homebuyers themselves.

NIMBYism on the local level can be just as stymying, often driven by the desire to preserve greenbelts. Releasing more land would almost certainly mean more homes. Research from the Institute for Public Policy Research found that between 2000 and 2007, residential land prices rose 170 per cent while built homes rose only 124 per cent. This explains in part why strategic land investing can be a good gamble, and yet why it can be so difficult - the planning authorities and communities hold a great deal of power in the equation.

To put all of one’s wealth into alternative investments would almost never make sense for the seasoned investor. But the opportunities in land and housing certainly appear to be good in the current economic cycle. Whether experienced or new to real estate, the investor is strongly encouraged to discuss land and building positions with an independent financial advisor.

Implications of Chancellor George Osborne's Manifesto on a "Northern Powerhouse"

The idea transcends elective politics. With Government devolution, the drive toward affordable housing north of London might strengthen the UK economy more broadly.

When Chancellor George Osborne started talking up the future economic prospects of Manchester and England’s North region in late 2014, many cynically believed it a ploy to curry votes for the Conservatives in the May 2015 election. But in the months that followed, indicators surfaced that suggest Osborne meant what he said. This should interest investors who believe that not all roads lead to London.

UK land investment, after all, pretty much follows the money. For anyone looking for capital growth properties, it only makes sense to buy and build where people are moving, where companies are hiring and where businesses are being established and growing. So is that happening – now or soon – in the cluster of cities that comprise what Osborne referred to as the “Northern Powerhouse?”

Perhaps. But this is not Osborne’s baby alone. Leading the charge away from the Capital City is the private sector’s own Jim O’Neill, the former chairman of Goldman Sachs Asset Management. O’Neill’s ‘retirement’ job is to chair an independent commission that looks to make Britain less centred on London and with economic forces spread about the whole of the country. His belief, shared by many including George Osborne, is that a redistribution of industry, finance, transportation, digital technologies and population will net out with a stronger UK overall. O’Neill concurs with many others who believe this also requires a redistribution of government authority.

Investors who might deem themselves capital growth partners would likely agree that this devolution of authority is a worthy strategy and with plenty of precedent. Germany, France and Italy have multiple cities that are as large or larger than their own capitals, to their advantage. As O’Neill observes, England suffers from London being almost too successful.

"I think it [the success of London] generates a lot of vitality, but it results in huge complications because you see these enormous distortions, particularly on things like house prices,” he says. “For young people, they finish university and think 'When are we going to London?', because it is the only place you can go. There is something a bit unhealthy about that."

He also notes that a great part of the population of London is made up of a very global polyglot, for better or worse. The British are largely found elsewhere.

The Office of National Statistics pegs shares of the UK economy by region, with London getting 22.2 per cent of GVA. Taken together, the North East, North West and Yorkshire and The Humber constitute a respectable 19.0 per cent. The trick is to get them working collectively. Away from the Capital, growth is a function of infrastructure, the energy economy (fossil and renewables), transportation, and improvements in broadband capabilities that can help with digital industry development.

The Guardian reported after the election that Osborne might have been making real promises after all. The nine councils of Greater Manchester now will have one elected mayor, and a devolution deal gives the municipality control over its transport budget, £500 million of skills spending and a £300 million housing investment fund. Residential properties away from the Capital are more affordable, but a need for more building to meet population growth and outsized demand exists in Manchester, Leeds, Liverpool and other cities as well.

The critical housing shortage and unmanageable cost of housing in London might drive all this in the end. Already young adults, particularly those equipped with knowledge economy skills, are leaving London for more affordable lives in Liverpool, Leeds, Manchester and other points north and west. Capital investments in the growth of commercial and residential developments increasingly make sense when these exoduses are counted and analysed.

O’Neill advocates strongly for regional organisations of cities (he has tried to coin the name “Manpool,” for joining Manchester and Liverpool, football allegiances notwithstanding) as a means to unlock the potential for growth, building, repopulating and revitalising the city centres. He clearly has George Osborne on his side, which certainly helps.

Investors in property funds or other assets, in the South, West, Midlands and North, need to consider all variables in developing a risk-reward analysis. Discussing a strategy with an independent financial advisor is strongly recommended.

RICS: “UK Housing a National Emergency”

The UK housing crisis has significant economic and social implications. The Government is responding, but private investments can really make a difference.

The Royal Institute of Chartered Surveyors (RICS) has been particularly vocal in 2015 regarding the rising cost of housing in the UK. The Institute lays blame for increasingly unaffordable homes to a supply shortage and, more specifically, a shortage of land released for use as residential property.

This is a scenario that is familiar to housing investors who, while typically working through joint venture partnerships, find their most critical task in the process involves petitioning local planning authorities for a use change. When achieved, the value of the land increases significantly – to the landowners, and to the surrounding community. UK land investments that result in housing have a ripple effect on the regional economy, particularly in how they make affordable housing a tool for employers who want to woo workers from other cities.

But when planning approval is a long time coming or fails to materialise, the whole goal of applying funds to achieve capital growth through residential development is derailed. The Localism Act of 2011 sought to reduce that, allowing for local councils to determine when a use conversion should be granted – and it has had that effect. And yet RICS and others feel the Act didn’t go far enough.

In a statement issued in mid-May 2015, shortly after the national election, RICS said, “The affordability and availability of homes in the UK is now a national emergency and addressing this crisis must be the priority for the new government.” The organisation’s head of policy urged the Conservatives to develop a “coherent and co-ordinated house building” strategy – meaning, that public authorities and private investors (e.g., partners in capital growth funds) alike need to step up and add new homes at a greater rate than has been the case for more than a decade.

Home building in 2014 was up from previous years, with 141,000 homes completed by the end of December. But even that number falls short of what is needed, which is closer to 250,000 per year to make up for a million-home deficit that currently curtails household formation. The building rate has fallen since the 1990s for a variety of reasons that include more-stringent lending practices (particularly since the 2008 financial crisis), a growing population and a failure by Government to replace social housing sold to tenants in the Right to Buy programme begun in the 1980s.

Conservatives argue the programs developed under the first administration of David Cameron effectively helped first time buyers get on the property ladder. Indeed, Help to Buy and other programmes have been instrumental in helping younger adults save for and purchase their first properties. But Labour spokespeople counter that this is working from the “demand” side, pushing up prices even further because supply is not yet ramped up appropriately to meet this increasing degree of demand.

Given the political wrangling involved, it’s no wonder that many see greater solutions when private investors (i.e., financiers looking to achieve capital growth from the funds they invest) get involved.

UK land investment money is smart when it is spent first in the areas of greatest need (demand). PropertyWire.com reported in mid-2015 that where employment rates are highest, there too are the biggest gains in value to homeowners and real estate investors:

• “The 20 local authority districts with the lowest unemployment have experienced average house price rises of 25% since 2009 compared with an increase of 17% for Great Britain as a whole.”

• “The 20 areas with the highest levels of unemployment have recorded an average house price gain of 3%.”

So while publicly supported housing is an essential part of a stable and just society, private investments and skills (i.e., joint ventures with partners in finance, infrastructure design, house builders and estate agents) are more likely to foster healthy economic development.

Investments in housing and real estate can yield great results and they are interesting in a growing economy cycle, as is the case currently in the UK. But an independent financial advisor should be involved in every significant position for an investor, as the variables are many while the stakes can be high.

What Effect Has the Stamp Duty Overhaul Had on Homebuilding in the UK?

Lowering the “slab stamp tax” was readily welcomed in all quarters – especially young buyers, homebuilders and investors. New building is expected to follow.

Chancellor George Osborne cut the stamp duty on home sales in late 2014 and observers in the housing industry almost unanimously agree it is having a significant impact on residential markets. If it favours any particular group it is most likely younger people making their first home purchase. The lower the price of the home, the lower the tax will be.

And in combination with the Help to Buy scheme, which has proven to be popular with first-time homebuyers, it might lead to more home building. The ripple effect is that everyone employed in home lending, transactions, building and development should benefit. Indeed, institutions and individuals who make alternative investments in land might well be beneficiaries of the reduced stamp duty tax.

A short summary on how that works: greater demand for homes and access to financing among younger workers could drive up prices, and many suggest that is exactly what will happen. But homebuilders who work in lower-cost, smaller residences now have a market of qualified buyers. The bigger question is: will they build?

One hint they will is that the Home Builders Federation UK has campaigned to abolish the stamp duty slab system. They say it distorts the market, penalises buyers and influences builders to construct homes that price just below the different stamp tax duty thresholds. National house builder Crest Nicholson announced in December 2014 that the lowering of the tax gives it the confidence to resume a new phase of building 280 homes in Southampton in 2015. The company says that 44 per cent of buyers in the first phase of the development were making use of the Help to Buy scheme, which is directed at first-time buyers. The natural hunger for real assets – a home to own – remains undaunted.

Just look at the numbers on how much the downward adjustment in the stamp duty saves homebuyers. The typical £273,000 home purchase formerly required a £8,200 stamp duty; now it will be closer to £3,650. The duty has risen 300 per cent since 2004. For homebuyers in London, where prices are much higher than elsewhere, the tax average is about £15,000; in the North East of England the typical tax is £640.

Managers of real asset funds – the money behind the developments – should take note. This is because the stamp duty reduction acts in much the same way of Help to Buy in that it lowers the bar of entry into home ownership. Real asset funds are typically applied to buy land and to establish council approval on use changes. With additional help to first time buyers, who are younger by nature, a good argument can be made that these developments infuse financial activity into a local economy. Those UK land investments are effectively an investment in a whole town.

For anyone drawn to land as an alternative investment, the important point to consider is simply that more transactions will be made at all price levels. Second-time buyers are more inclined to make that move up the property ladder, and those above them will do the same. Even homes priced north of £1 million, which will not see a lower tax, will still be purchased by those who can afford them because they will be able to sell their lower-priced current home.

But all investors should seek the advice of an independent financial advisor. They understand market forces as well as how to balance an individual’s wealth portfolio against relative risks.

How Effective Might the Help-To-Buy ISA Be for First Time Buyers?

Younger working adults in the UK struggle to buy homes, largely because a deposit is hard to save. This programme might help, particularly outside  London.

When UK Chancellor George Osborne announced the Help to Buy ISA in January 2015, it was cynically viewed by some as the Conservative’s election-year ploy, a response to Labour’s proposed stamp duty elimination for first-time buyers. There is another way of looking at this: the fact the topic of first-time homebuyers played into the national election certainly speaks to the importance of the cost and short supply of housing.

Post-election, the Help to Buy ISA is on track for implementation in the fall of 2015. It enables would-be homebuyers to deposit up to £200 per month – up to a total of £12,000 – into a tax-free account that will be matched with up to £3,000 from the Government (£1 for every £4 saved) if and when that money is used to buy a first home. It will give the new homeowners a structure for savings along with the financial incentives to do so.

Detractors of the programme suggested that the projected cost to the Government of £835 million could instead be used to directly build homes, including affordable housing. More building takes place currently in the private sector due to the work of property fund managers and the like, investors who develop housing where and when planning authorities allow and where it serves a local economic need.

At least the scheme seems to favour buyers of entry-level-cost housing. A spokesperson for property firm Savills told The Guardian in March that they predict “it is more likely to help get buyers over the deposit hurdle in the lower value, lower growth markets of the Midlands and the North.” He indicated that affordability was less likely for younger buyers in London and the South East, where capital growth land opportunities are less likely given the degree of development and high price of land in those areas.

So it seems that investors in property funds might do well to focus on economic development and growth industries in places such as Peterborough, Manchester, Birmingham, Allerdale and Liverpool. Younger families are reportedly moving out of London and to where jobs are available and property fund investors are building price-accessible homes that further facilitate the local economy (those involved in UK land investments take note).

This move away from the Capital City is a theme in capital growth investing for housing as well as industry. The increasingly high prices in London make it more challenging for entrepreneurs and established firms to set up business operations there and attract staff at reasonable wages. Commutes of longer and longer distances have become necessary. Property fund investors who can instead buy property near Southampton or Peterborough, for example, then convert it to more valuable residential or commercial property, are more likely to find a ready market of buyers due to the Help to Buy ISA programme.

There will always be opportunities for capital growth in London as well as the rest of the UK. However, the equation that can provide the fastest valuation increases – the conversion of unused land to housing by way of council approvals – may more likely happen up North, down South and to all points Eastand West.

Investors should always investigate risks relative to their investment portfolios. In almost every circumstance, the investor should speak with an independent financial advisor before taking a position.

Does the Conservatives’ 2015 Victory Mean More Houses Will Be Built?

The fear of a mansion tax and general uncertainty preceding the May election stalled house sales and building. Prices have risen since May, emphasising demand.

On the heels of the Conservative’s definitive election victory in May 2015, estate agents and large home owners breathed a sigh of relief: there would likely be no mansion tax as proposed by Labour. Sales of homes, especially in London, began to pick up within days. The Guardian reported on June 1 that “boom conditions are back in the UK housing market and prices look set for a new surge before the end of the year,” crediting the election outcome for galvanizing buyers and sellers.

But do sales and price increases mean that more homes – particularly those in the lower and middle price range – will be built? Can the UK get back to building the quantity of houses that will help alleviate the crippling price rise of homes for sale, as well as rising rent? Can the key players involved in development – lenders, developers, property fund partners, builders – join forces to serve the estimated one million households that need a place of their own?

A property fund partner will explain there is not a simple relationship between demand, pricing and supply – the classic relationship that is (usually) fundamental to economics. There’s a little more work (read: bureaucracy) involved, as most seasoned people investing in UK land understand.

When developers and homebuilders want to go about the business of constructing residences, it’s really only after specialists in planning effectively convince local councils that the homes are a net-positive for the community at large. Investors in UK property funds in essence back those specialists, who identify land that is ripe for conversion to development. This approach to alternative investments generally occurs where housing demand is growing – often due to increased employment in the vicinity.

The Home Builders Federation weighed in regarding their hopes for a house building acceleration after the election. The organisation notes several key factors that should influence the Government in its policy formation. They include:

• Building is up in 2015: 40,340 new homes were started in the first quarter of the year, the highest such number of any quarter since 2007. 
• Building was already on the rise in 2014: The new home starts, numbering 137,310 last year, represent a 10 per cent increase over 2013.
• Average house price is  now £193,048: Mortgage lender Halifax said in May that this represents an 8.5 per cent rise over a year ago.
• Completions still short of need: England needs to build 230,000 homes each year, and even if the strong new start building numbers continue apace (which would be about 161,000 homes) it would fall short of the need for this year alone by 70,000 homes. Across the UK, the existing shortage is believed to currently stand at one million homes.

The Royal Institute of Chartered Surveyors (RICS) considers this continued shortage and rising prices a “national emergency” and said as much “in unusually forceful language,” according to a mid-May report (carried by Reuters news agency). The RICS statement was directed at the Government, but participants in alternative investment funds should take note. Housing wasn’t the most prominent issue in the May elections, however the price of housing will almost certainly grow in importance in the near future. A report by the surveyors predicts a price rise of 25 per cent within just the next five years.

Whether an investor choses alternative funds or traditional stocks and bonds, the risks and relative positions of those investments should be made in balance with individual family wealth-building strategies. Speak with an independent financial advisor before taking a significant position.

What to Make of George Osborne’s Get-Tough Stance with Councils on Housing Development

The Chancellor’s “Fixing the foundations” proposal positions housing as necessary for economic growth. The directives are pretty clear on the need to build.

The Localism Act of 2011 and the National Planning Policy Framework (NPPF) it spawned sought to streamline the homebuilding process by granting greater controls and decision making to local planning authorities (LPAs). But to those who make alternative investments in land - toward the goal of building much-needed new homes - it’s clear that about half the councils are slow to establish any residential development programmes whatsoever. So the Chancellor of the Exchequer, George Osborne, has determined that more specific instructions from Whitehall are needed to prompt homebuilding throughout the UK.

Osborne’s proposal, “Fixing the foundations: creating a more prosperous nation,” was issued in July 2015. The broader message is about growing the UK’s economy, but the 90-page blueprint devotes much space to the role that housing plays in the economy: “The UK has been incapable of building enough homes to keep up with growing demand. This harms productivity and restricts labour market flexibility, and it frustrates the ambitions of thousands of people who would like to own their own home.”

As a follow-up to Osborne’s productivity plan, Planning Minister Brandon Lewis gave LPAs until early 2017 to produce their local plans. To counter those that lag behind, the blueprint provides that the following initiatives be taken:

• Take tougher action to ensure that local authorities are using their powers to get local plans in place. The Government will intervene “to arrange for those local plans to be written where necessary.” (Currently, investors working with real asset fund managers de facto devise such plans, which then require LPAs to review and either approve or disapprove of what is proposed.)

• Encourage “proposals for stronger, fairer compulsory purchase powers, and devolution of major new planning powers to Mayors of London and Manchester.”

• Fast track approvals of infrastructure projects that have “elements of housing development.”

• Give automatic approvals on conversion of brownfield land to residential, retail and commercial use.

• No approvals are required to add two storeys to residential buildings, up to the height of an adjoining building, in London and possibly also Manchester. (This plan still allows for neighbours to object and effectively require planning authority review.)

• Extend the Right to Buy to housing association tenants.

• Deliver 200,000 Starter Homes for first time buyers, built on brownfield land or “ensure every reasonably sized housing site includes a proportion of Starter Homes.”

It certainly makes sense that Osborne would prioritise the construction of more homes. As it is, an estimated one million households are unable to buy or rent their own dwellings due to the lag in new home construction in the UK. Investors who favour real assets see a clear opportunity in such strong market demand, which is demonstrated by the continued rise in home prices and rental rates all across the country.

UK Land and real property have historically proven to provide a good return on investment to owners and investors. But even in the face of such overwhelming demand for new homes - 250,000 dwellings should be built every year, however only 118,760 were constructed in the UK in 2014, according to official figures from the Department for Communities and Local Government - such use of capital should be approached with prudence. Speak with an independent financial advisor to weigh the risks and rewards, the alternatives, as well as how property investments balance against other assets.

What is the NHS Health New Towns Initiative - and How Does it Relate to Development?

Melding the National Health Service with house building in England might have far-reaching benefits. Urban design and medicine can work together.

Very often creative solutions arise from crises. That may be the case in how the National Health Service (NHS) is getting involved in England’s housing shortage.

It’s a well-known fact that the UK is short of homes. To simply catch up with the need of a growing population, we need to build no fewer than 200,000 new homes every year for the next five years. Some argue that the number might be closer to 250,000 new homes. This is being approached on a variety of levels, including housing associations that construct affordable homes as well as the by the private sector of homebuilders, UK land investment funds, institutional investors and the like adding to the housing stock wherever resources and planning authorities allow.

But building methods are changing for the better, even as approaches to public health are enlightened with new information, new data and new ideas on what makes for a healthy society. This is why the NHS chief executive, Simon Stevens, announced in early 2015 what they are calling the Healthy New Towns initiative. The approach is multipronged but centred around a single idea, that where you live should support your health.

The programme will include five long-term partnerships between the construction sector, perhaps including real asset investing groups who buy land for development, managers of UK property funds, housing associations and local planning authorities with NHS England and Public Health England. The real assets of the partnership will largely be the following:

• Land and building infrastructure will consolidate NHS clinics, schools, fire and police stations and other public services for economic efficiencies.

• Design communities that promote social cohesion, mental and physical wellbeing, as well as active lifestyles (walking, cycling and sports) that resist “obesogenic” culture.

• Promote independent living and proactive health management through the use of digital technologies that aid communications with healthcare providers.

This is in contrast to post-War design and construction that lent itself to isolation and car transport. The Financial Times reports that £2 billion has been allocated to this programme which local councils can bid for later this year. Stevens says that fEbbsfleet in Kent and high growth areas such as Tower Hamlets in London and Swindon and, are likely candidates for the Health New Towns funding.

The programme will be tested in a range of community sizes, up to communities of 10,000 units. Each will be afforded global expertise in spatial and urban design.

Both the charity Shelter, which advocates for decent housing, and private land developers working with real asset investors, endeavours to enable healthier communities by simply increasing the country’s housing inventory. Shelter has documented the problems of overcrowding in decrepit conditions, citing how one million English children in bad housing have a 25 per cent higher risk of ill health and disability during childhood and early adulthood. This includes greater incidence of meningitis, asthma, slow growth, lower educational attainment, mental illness and residual effects from many of these things into adulthood. Other health experts point to a lack of fluidity in finding housing near one’s workplace, which leads to longer commuting times and less opportunity to exercise and to engage in physical activities with children.

Urban design the world over is looking to tackle the global obesity crisis and other related health problems with various schemes to encourage exercise, better nutrition and smarter disease management. This is a challenge for the healthcare system, for business and for patients themselves. Collectively planning and investing in new approaches - with solid science and data analysis of the results - should lead to a healthier future.

Investors can and should act out of a sense of the general good - in real estate, healthcare and in raising families in healthy environments. But all investments should also be rational relative to personal wealth building. Consult an independent financial advisor to learn more.

UK's Growing Retirement Villages Can Affect the Overall Housing Supply

Pensioners are living longer, which contributes to the housing shortage because they remain longer in their homes. But retirement villages might change that.

With the UK’s Baby Boom generation now retiring, their numbers and their money seem to be the impetus for retirement village development. Importantly, this may be better for the health of the country’s pensioners and it frees up much-needed housing for younger families and individuals. But due to pricing - and some enviable amenities - the first generation of retirement villages is pretty much for the well off only.

That may change as the experience in other countries shows retirement villages can be affordable to the middle class. It’s interesting to consider how Britain has lagged the rest of the world in this regard. In the U.S., Canada, New Zealand, Australia and South Africa such developments are common.

Investors who look for capital growth land opportunities might give some thought to retirement villages for development. They are smaller than the homes most of their residents formerly occupied, are clustered in such ways as to encourage communal socialising, and they have amenities such as pools, spas, recreational halls and on-site emergency medical care. In New Zealand, 5.5 per cent of older people live in retirement villages, and in the US between 6 per cent and 12 per cent (depending on which state) are in these “grandma ghettos” (the term is unfortunate and largely inaccurate). But in the UK, these living arrangements are currently only available to 0.5 per cent of people over age 65.

And by current trends, land is what’s needed for these developments. Almost all are in the country, with the exception of London’s high profile first retirement village, Battersea Place in South London. The neighbourhood itself is on the rise due to transport infrastructure and the continued gentrification of all London districts and suburbs (including Clapham, Vauxhall and Kennington). Property fund managers might see opportunities in the numbers: one-bed and two-bed apartments sell for £650,000 to £800,000, while a three-bed penthouse is priced at £2.95 million.

The purchase price doesn’t cover all costs. Service charges are at least £1,000 per month. Then, when the retirees - or their heirs - sell, they are charged 30 per cent of the resale price or 20 per cent and half of capital gains. This is called a deferred membership fee. These are London prices of course - less expensive developments are found from Guernsey to Plymouth, Dover, Salisbury, Milton Keynes, Gloucester, Birmingham, Peterborough, Sheffield and Manchester.

What’s driving the new developments is the nature of the Baby Boomers themselves. Many have the money (e.g., cash from their homes and investments), and the inclination. Rather than looking at retirement communities as a march to the grave, they see it as freeing them from larger homes that took too much work to maintain. Retirement villages provide socialization and recreation that actually lessen the burden on the National Health Service: studies show that residents reduce their need for medical care after moving into such communities.

There’s also something in this for younger families looking to buy homes. As more pensioners leave their residences, those existing homes become available to younger working people. In a country where the home shortage is believed to be one million dwellings, it’s a move in the right direction.

For investors, the need to build everywhere provides capital growth opportunities. That might be in retirement villages or housing for younger people. Either way, the need continues to build. Planning authorities are unleashing more land every year to accommodate this - however by most assessments, not nearly enough.

Whether or not one invests in capital growth funds such as UK land, the stock market, gilts or exotic real assets such as antique cars, the balancing of investments should be discussed with an independent financial advisor. Everyone wants a comfortable, well-appointed retirement residence. Smart, successful investing is the path to get there.

UK House Prices Rise Past Predictions in 2015: Will This Stimulate New Home Building?

Increasing prices typically stimulate new building, but the UK housing market has friction. Despite many obstacles, investment groups continue forward.

UK Home prices have continued to rise in 2015, outpacing restrained expectations set by analysts in late 2014. According to PropertyWire.com, average home prices rose 2.75 per cent across Britain in the first six months of 2015, pushing the average price to £270,674 (this varies by region). Top performers included the North East (3.1 per cent) and North West (3.0 per cent). Scotland rose the most at 6.6 per cent growth (average home values there now are at £183,230). London prices, considered stratospheric by most observers, slowed to a 2.5 per cent increase in the January-June 2015 time period.

So with so much price pressure on the housing market, does this mean more homes will be built? Do investors engaged in UK joint venture land opportunities have a perfect set of conditions to achieve respectable asset growth?

Note that in 2014 there were 118,760 home completions in all of England, which is far short of the 240,000 to 250,000 homes that should be built annually over the next decade to meet the country’s growing population. With an adequate supply of affordable homes, higher ownership rates and a robust home construction sector, Chancellor George Osborne believes the overall economy benefits. He recently issued a 90-page blueprint (“Fixing the foundations: creating a more prosperous nation,” July 2015) that emphasises the role of both increased homebuilding and distributing economic power and populations to cities outside of London.

One argument for the shortfall in building is that the red tape and NIMBYism inherent in planning approvals stands in the way. But joint venture investors, institutional investors and homebuilders achieved 240,000 dwelling planning approvals in 2014, more than the 120,000 homes that were actually built (to be fair, a portion of those approvals are under construction in 2015).

Another argument is that landowners - be they legacy owners such as family trusts or farms, opportunistic investors, or local governments - are holding onto un-built properties in land banking schemes. That may be true in some situations but is not evidently widespread. Property fund management firms more typically wish to shorten the time between the purchase of land and when it is designed, built and delivered. They want to extract increased value that grows the property fund as quickly as possible.

That said, a concept similar to land banking is with non-dom owners of pricey homes in central London. Buyers rarely if ever actually live in the homes they buy; rather, they treat them as financial instruments that perform well with year-upon-year of double-digit capital growth. The stability of English society and our Government offers a financial safe haven for wealthy foreigners who see opportunity in properties in London and, increasingly, outside of London as well.

Chancellor Osborne’s blueprint placed a great deal of emphasis on brownfield building sites, as well as a scheme to increase density by allowing existing buildings to add up to two storeys. Brownfield building certainly has its merits; the downside is when expensive remediation to remove toxic substances is required, or when the location of the site requires extensive infrastructure development at public expense. Sometimes these added expenses have to be incorporated into the developer’s cost structure that then must be added to the purchase price of the completed properties. Often, those costs are prohibitive and effectively kill the project.

An argument has been that homebuyer financing, particularly for younger working people who have yet to buy their first homes, was challenged by stringent lending in the wake of the 2008 financial crisis. But several Government initiatives (Help to Buy, Starter Homes, Help-to-Buy Isa, among others) have and will provide access to much-needed mortgages. That said, with more buyers chasing fewer dwellings the added upward price pressure is almost inevitable.

It bears noting that public sector investment in affordable council housing -which peaked in 1967 at 196,000 homes that year - has dropped precipitously such that fewer than 5,000 homes have been built by local authorities in any year since 1992. Housing associations and the private sector have never been able to entirely pick up the slack.

So in short, there are many solutions that attempt to chip away at the problem - but no silver bullets. In the meantime, investors look to where they can buy land, achieve planning approval, then develop the infrastructure that enables homebuilders to deliver homes. Housing associations work in a similar fashion to the best of their abilities and wherewithal.

Investors should always engage an independent financial advisor to weigh opportunities and options. Real estate and land investing has historically been a solid means for growing wealth, however every investor’s portfolio operates by a unique set of variables and strategies.

Does the Price of Oil Affect UK Housing Investments and Real Estate Values?

Cheers and jeers greet low petroleum prices, depending on where and in what sector one invests. The impact on UK real estate is minimal - except Aberdeen.

It’s a funny thing to discuss the dramatic drop in oil prices. To anyone with an interest in the petroleum and gas industries, the historic dips in prices in 2015 (from $115 a barrel in mid 2014 to as low as $44 a year later) wildly change the nature of the business and returns on investments.

But of course when energy is cheap it has a positive effect on other industries. That would include any sector of the economy where energy is a significant cost, including transportation, manufacturing and, often, real estate - mostly in the commercial sector, where owners and their investors are responsible for building energy costs.

So what might be the impact of the continued low price of oil? Might it have an effect on UK house building and the capital growth planning relative to construction of new homes and neighbourhoods?

In the entire United Kingdom, Aberdeen is perhaps the most impacted due to its relationship to North Sea oil. The city is regarded as the centre of Europe’s petroleum industry, with the world’s largest heliport sending rig workers and engineers to offshore platforms. An estimated 500,000 people work in the vicinity of Aberdeen work in the industry. As with similar fuel-based cities around the globe – Dubai, Houston and Perth, among others – Aberdeen sailed well through the 2008-2010 recession with oil priced above $100 a barrel. But now that prices are expected to stay near the $50 a barrel level for some time to come, investment in the area is cutting back. BP cut ten per cent of jobs in its Aberdeen workforce in February 2015, with other firms since following their lead. With reserves in the North Sea already said to have peaked, local economic development interests are already pushing to diversify the economy.

Investors in the petroleum sector might benefit from balancing their portfolios on a separate track, such as alternative investment funds. There are so many industries and the economy as a whole that might benefit from low energy costs. With a lower cost of producing and transporting goods, it places downward pressure on inflation and consequently the Government is less likely to raise interest rates. That in turn keeps mortgages affordable. When the alternative is to fund homebuilding over paying for foreign-sourced energy, it even seems to benefit the construction industry and its supply chain.

Reportedly, investors from the Middle East might even be drawn further to purchase real estate in London. The “safe haven “ of the UK economy has already drawn billions of pounds and thousands of non-dom homeowners to treat central London as a financial instrument; builders can only be credited for being savvy enough to serve that market.

Throughout the UK, real estate-related capital growth happens in many forms but housing is probably the most important driver. Where there is a growing population (which often means a growing company or industry that is centred in a city) there is also likely a growing need for homes. Overall, the country needs about one million additional dwellings to balance supply with demand. Funds applied to building new houses generally provide a return on assets in just a few years.

What holds back much building is not energy costs but the planning process. Strategic land investors will buy raw property that could be converted to housing. But it all requires local planning approval, something specialists in strategic land put a great deal of effort into. Capital funds are tied up for 18 months to five years in the development process – long enough, perhaps, to see the price of oil return to 2014 levels.

Housing demand is expected to remain strong for a decade or longer as the UK struggles to accommodate a growing population. Investments in housing or raw UK land can make sense in many wealth-building portfolios, however a consultation with an independent financial advisor is highly recommended.

To What Degree do the Housing Shortage, Home Prices and Rising Rents Extend Beyond London?

Birmingham, Manchester, Glasgow and Leeds are now some of the most expensive cities in which to rent in Europe. Can investors and the Government rein that in?

The year-upon-year of double digit housing price increases in London makes for newspaper headlines around the globe - in part because London has so many non-dom owners of palatial homes and flats who treat these properties as financial instruments. This phenomenon has the unfortunate effect of pushing up home prices and apartment rental rates for middle class people who work in the Capital City.

This is not restricted to London. The shortage of housing exists throughout much of the UK, as recent statistics prove. Home Let, the UK’s largest tenant referencing specialist, identified in the spring of 2015 that UK rental prices in the first quarter of the year rose an annualised rate of 10 per cent nationwide. While London will always skew the national numbers (rent in Greater London averages £1,436), what perhaps is most surprising is that rental rate growth is higher elsewhere. As it turns out, the 2014-2015 rate of rental increases is higher in West Midlands (7.9%), East Anglia (8.4%) and South West (15.5%) as compared to London (7.5%). Close behind London are Scotland (6.2%), Northern Ireland (5.2%) and Yorks & Humber (4.3%). Home Let also emphasizes that rents have risen in all 12 UK regions in the three months to May 2015 compared to 2014.

Why the across-the-boards hikes? The shortage of housing in the UK is no secret. Despite the efforts of strategic land developers - private investors and developers who endeavour to convert unused land to residential development - the country is easily short of one million homes that younger people need to establish families. The charity Shelter advocates for freeing up more land for more development at all price levels as a means to alleviate housing costs at the bottom level. And yet the number of homes built in 2014 was roughly half of the 250,000 dwellings thought to be needed.

What’s new is that the price increases, due to the homes shortages, are being felt in cities north, west and south of the Capital. UK rents are the highest in Western Europe. London is more expensive than everywhere, including Paris, Milan, Nice and Rome. But ranking 6th and 7th in the European list compiled by Easyroommate.co.uk are Birmingham and Manchester, with Glasgow at #9 and Leeds at #11. That’s five UK cities ranked among the Continent’s top dozen.

As a spokesperson for the Association of Residential Letting Agents told the website Property Wire, “It is worrying to see so many agents reporting an increase in the cost of rent over the last six months, especially considering so many people rent as a way to bridge the gap whilst they save to get onto the property ladder.”

To those who engage in real asset portfolio investing, this spells a clear opportunity. With housing so pressing a need it makes sense to buy UK land, get planning authority approvals and then go to work on constructing infrastructure and the dwellings (real asset investors typically transact the land and achieve planning permission, then subsequently sell lots to homebuilders). The stumbling block is planning approvals as local authorities sometimes have to balance development against local citizen sentiments that resist development.

Chancellor George Osborne has stated that opposition to housing effectively means opposition to national economic growth. “Planning freedoms and more houses to buy” is a lynchpin in his blueprint for building a growth economy (“Fixing the foundations: creating a more prosperous nation,” July 2015). He places the importance of affordable housing in the context of enabling workers to adapt to change, and that an effective land and housing market “helps firms to locate where they can be most efficient and create jobs ... enabling people to live and own homes close to where they work,” he writes.

Osborne points out that recent approval process streamlining (e.g., the Localism Act of 2011 and the National Planning Policy Framework) has housing starts now at a seven-year high and that first-time buyers rose by 20 per cent in 2014. Also, the Help to Buy program has enabled 100,000 households to get on the property ladder.

Even with that, however, rental rates continue a rise. It appears as if more must be done and that for investors, the opportunities to build and sell homes and provide rental housing continue to be rich.

Would-be housing investors still need to go about all investing with caution. Whether engaging in strategic land investment or other real asset portfolios, investors are urged to discuss strategies and specific UK property funds with an independent financial advisor.

The Greek Debt Crisis: How Might it Affect UK Real Estate Investments?

The UK’s outsider status relative to the Euro is an advantage. But the crisis has a ripple effect throughout the world, and might indirectly impact British investors.

Investors across the globe are riveted on the near-weekly announcements on the status of the Greek-Eurozone crisis. As well they should: the complex interplay of economies within, without and possibly exiting the European Union are a game of chess taken to a third dimension. The August 2015 bailout deal was the latest pause in the unfolding scenario.

Which begs a question for those investors who put their money into UK joint venture real estate partnerships. Will whatever happens to Greece and the Euro affect us? How might loans, defaults and austerity measures affect the success of a joint venture that is building homes in Peterborough?

The short answer is probably not much. The buyers and builders of luxury homes in Central London might feel an effect, but only very indirectly. It’s well known that wealthy foreigners from China, the Middle East, Russia and elsewhere are in the majority, buying pricey flats and homes in the Capital City. With the rare exception of those who find themselves cash-strapped due to the Greek crisis, it’s unlikely they will reduce their spending in England. The UK is their safe haven, after all, from the volatility and instability their assets are exposed to elsewhere.

Another slight effect on UK housing investments might come because some risk-driven investors see an opportunity in Greece at this moment. A lifestyle reporter at Forbes.com wrote in July that a leading Greek real estate website has seen a curious uptick in interest in Greek properties, likely driven by a 50 per cent drop in prices and 90 per cent drop in transactions since 2007. The web traffic is not from potential Greek buyers but instead from people in other countries that include Russia, Italy, France, Turkey, the US, Australia and Canada. It’s surmised that these are countries with historic associations with Greece and a large population of Greek expats. Perhaps they see a recovery at some point in the future, and they’re willing to buy a bargain that can weather the storms that occur in the short-term. If they are spending their Euros, Dollars or Rubles in Athens, it’s possible they are spending less in London.

Not that the effect is all that noticeable. London’s population, at an all-time high of 8.6 million people, continues to experience double-digit house-price increases in 2015, a multi-year trend.

Nor is the broader UK economy terribly vulnerable. The Bank of England published its biannual Financial Stability Report in July 2015. While vigilant over how a crisis contagion might affect the financial services sector, BoE Governor Mark Carney told The Telegraph, “A series of defences are in place and depending on how events unfold, those may be tested,” he said. “A persistent impact on economic activity [in the UK] is unlikely.” The Telegraph explained that UK bank exposure was at most 1 per cent of the sector’s capital buffers. HSBC is the most exposed of the large lenders, however the others might feel the effects if the crisis were to spread to Germany, France, Italy and other countries where those banks have a greater volume of business.

Perhaps the most vulnerable borrowers who are engaged in real estate investing - buy-to-let landlords - would suffer from a rise in interest rates because many of their loans are interest-only. Those types of mortgage holders account for 18 per cent of the flow of new mortgages; an interest rate rise might overwhelm their property income.

UK capital growth fund investors essentially ride independent of the big banks, putting their money into raw land acquisitions that become residential and commercial properties. Rather than relying on a natural increase in value, these funds target strategic land opportunities where planning authorities can grant a use change. The capital growth then is expedited, even as much-needed new homes are built.

Investors of all stripes should pay attention to the global economy as well as what’s happening in England and in their own portfolios. An independent financial advisor is highly recommended for objective advice on all investment dynamics.

Shortages of Bricks and Bricklayers: Factors that Are Slowing UK House Building

The Great Recession continues to slow England’s return to full home building with limited material and labour capacity. There are creative solutions, however.

There is a multitude of reasons cited for the housing shortage in the UK. One is a shortage of UK land, or more specifically land that is approved for building. Second, the financial crisis of 2008 has residual effects on younger families who have difficulty mustering the required deposit to buy a home. Third, as many as one million British households are waiting for homes that, as of now, do not exist.

But for all the UK land investment groups and Government programmes designed to address these shortages, there are emerging yet other key shortages: there aren’t enough bricks and bricklayers needed to build new homes.

The Guardian reported in April 2015 that, according to the Federation of Master Builders (FMB), “members are already struggling to get the skills and materials they need to meet demand.” And truth be told, while the brick/bricklayer shortage is most critical – an FMB survey found that fully 50 per cent of construction firms report difficulty at recruiting bricklayers in the past year – there is a skills shortage across the building trades: carpenters/joiners, plumbers and HVAC trades, supervisors, site managers, plasterers, roofers and civil engineering operatives are all in short supply.

The industry warned of a skills time bomb during the recession, as hundreds of thousands of workers left their professions simply due to a lack of work. Making things worse, the Construction Industry Training Board (CITB) projects that a significant number of workers, 400,000 people, will retire in the next five years.

From the materials side, the Brick Development Association, the brick makers trade group, says the recession played a role in shortages there as well, as production facilities were mothballed in the years following 2008. Returning those facilities to production takes investment that some plants are unwilling to make without greater certainty about Government supports of the market, say industry officials. Long waiting times and rising prices plague the industry, with 62 per cent of construction companies waiting at least two months for order delivery; some order backlogs are as long as six months. Even with a 17 per cent increase in capacity in 2014, about 20 per cent of the nation’s bricks used were imported from the Netherlands and Belgium.

The problem is more pronounced in some regions than in others. Investors working through real asset management groups factor this into their planning of residential developments, as timing on delivery is a critical component of how their investments perform. There is some indication that national homebuilders have a advantage in that they are able to source skilled labour and building materials faster than smaller construction firms.

One solution that could be a real asset in the national campaign to add to the housing stock might be found in modular housing. Built off-site and delivered by lorry to the home site, modular buildings offer faster construction and therefore a faster return on investment to investors and managers. Because modules are manufactured indoors weather is removed as a factor, as is the risk of mould, mildew and rust. Modular homes are judged to be greener due to less waste in materials and less site disturbance where assembled, and are reportedly less expensive to build as compared to traditional building methods. Modular homes are made of wood frame walls, floors and roofs, sometimes with brick or stone exteriors. The method is used for private house building, housing associations, student accommodations, residential care homes, hotels, disaster relief accommodation and holiday homes, however about 80 per cent of London’s highest structure, The Shard, was built off-site using similar methodology. Only about 20 modular home manufacturers currently exist in the UK.

So as England deals with its shortages of homes, the supply chain and asset management of money, land, materials and labour, all such factors play a role in helping alleviate the shortage. Given the promises of politicians of all stripes in the 2015 election, land investment groups as well as the Government have a good amount of incentive to put every tool to work as soon as possible.

That stated, all investments should be approached with objectivity. Speak first with an independent financial advisor about your interest in housing, land and related assets.

Homes Near Good Schools More Valuable: UK Infrastructure Matters

The fluidity of Britain’s renter population reveals the importance of outstanding schools. Investors in all types of residential property take note.

What’s driving up the rent in parts of England? Is it the shortage of quality rental housing? Or the increase in the UK population overall? Is it the fact that fewer people own their homes today and by default have become renters?

It’s each of those things plus one more: it’s the quality of the schools. According to the UK Office for Standards in Education, Children’s Services and Skills - OFSTED - properties located nearest schools with outstanding ratings have seen a dramatic uptick in families in the seven years since the financial crisis of 2008. The broader takeaway for investors in housing development - including those engaged in UK land investing - is that proximity to quality free schools will increase the value of those properties for both rental and for sale dwellings.

In the past, prior to the recession, singles and couples without children largely rented properties nearest schools, even those that were considered some of the UK’s best educational establishments. According to Countrywide PLC statistics, only 9 per cent of rental homes had school age children near schools in 2007. But that number jumped to 28 per cent by 2015, which the lender says is due to the growing number of families living in the private rented sector (i.e., fewer young families own their homes).

Of course what’s popular with renters is quite likely also popular with homeowners. So it’s a fair assumption that, regardless of whether a family owns or rents their home, they will prefer properties nearest the schools they prefer as well. This is worth noting for investors who weigh working with different capital growth properties: schools, among all types of infrastructure, matter.

Other factors found in the Countrywide quarterly lettings index:

• Tenants living within a kilometre of a school that is rated outstanding pay 14 per cent more in rent than at properties more than a kilometre distant from the school. Builders of rental properties should scout land near the best schools for investing, perhaps.

• Tenants renting three and four bedroom flats pay an even higher premium, about 16 per cent. Instances are cited where identical homes across the street from each other let for 15 to 20 per cent more because of school quality in their catchment area.

• The margins for school catchment areas are fine. Most households moving to closer proximity of a school only move about a half mile. On average, rental moves average three miles.

Schools are not absent from any investor-developer’s considerations in building. Along with utilities, roads, hospitals and recreational parks, district heating schemes, police stations, transport and flood defences, state schools are part of the infrastructure funded by the Community Infrastructure Levy (CIL). Choosing how the money is spent is largely up to local planning authorities. CIL rates are assessed in pounds per square metre, and, according to the Planning Portal website provided by the Department of Communities & Local Government, “charging authorities should use [infrastructure planning] evidence to strike an appropriate balance between the desirability of funding infrastructure from the levy and the potential impact upon the economic viability of development across their area.”

To investors looking to maximize the capital growth potential of building new homes, the relative condition of all infrastructure components should be a consideration in the investment. Homebuyers and renters may be clamouring for properties to buy or rent, given the national shortage of homes, but these are still factors that play into where they conduct their search for suitable dwellings.

Investments of all types require myriad considerations and are best made with objective advice. An independent financial advisor can guide the investor to investigate factors having to do with specific investments as well as how they can affect overall wealth development strategies.

Who are First Time Home Buyers in the UK - and What Do They Want?

For younger people, simply being able to buy is a priority that hasn’t been accessible in recent years. Things are looking up, but many challenges remain.

To a certain degree, investors in housing need to think young. That is, they should consider the supply of buyers, those people who are making that first step onto the property ladder. Whether the investors and homebuilders (many working though real asset portfolio investing) are building higher-end single-family homes, or one-bedroom flats, those first-time buyers are the supply chain of customers who will push up demand for the product.

Not that demand is much of an issue in the UK. The country is critically undersupplied in homes, where the 120,000 new residences built in 2014 fall short of the 200,000 or more than need to be built every year. In the years following the 2008 recession, lending was tight and builders were nervous. Plans to build were scaled back. But with rising incomes and a number of Government-sponsored schemes that help builders and buyers - in particular, first time buyers - get in the game, building rates are up. Most importantly, buyers are making their moves.

But who exactly is the first time buyer? The following helps break it down:

Ages - The national average age of buyers is 29, which is higher than historical norms but not terrible in the overall scheme of things. In London, first time buyers’ ages have risen from 30 to 32 since the recession.

Wages - Housing charity Shelter teamed with KPMG to identify discrepancies between local housing prices, actual average wages and wages required to get a first-time buyer loan. For example in the South East, the average first home cost £230,000, which requires a wage of £46,000 but the median wage in that district is £24,000. For the UK overall, it’s £202,700 for homes, £40,500 is required and £22,000 is the median wage. The study also found that while 73% of people would prefer to own vs. rent, 69% feel there is not sufficient affordable housing.

In London, where prices are rising quickly, where the number of homes sold for £1 million increased by 25% last year yet the number sold for under £300,000 decreased by 9%, first-time buyers nonetheless were on the rise. How? The Council of Mortgage Lenders finds that in the Capital City that parental help is widespread in deposits and outright purchases.

Children? - A spokesperson for the Mortgage Advice Bureau told the Daily Mail that banks were increasingly asking questions about family plans, particularly when the borrowers had small deposits. They want to know if a working wife or husband planned to quit her or his job if the family adds children. Such borrowers can be refused on a vague, “you don’t fit my criteria,” the advisor said.

Regions - Of course, London is the least affordable area for first time buyers (average home price is £323,333). Northern Ireland (average home price is £80,703) is most affordable, while seven of the top ten affordable areas are in Scotland.

Pessimistic expectations - Propertywire.com reported in April 2015 that an attitudinal survey by the mortgage firm Halifax found 79% of people ages 20-45 believe that banks don’t want to lend to first time buyers; 21% believe it’s almost impossible to get a first-time mortgage. Halifax is quick to point out this is a myth – but perception can be reality.

Sensible - The Office of National Statistics shows that first time buyers have mortgage repayments that consume, on average, one-third of disposable income. In 2007, the height of the last housing bubble, that was closer to one-half of income. So buyers are at least setting themselves up for a realistic loan burden.

It is important to note that this is a recovering market. First time buyers in 2006 numbered 402,800, but fell to 192,300 in 2008. It is now 311,500 buyers (2014) and expected to climb further in 2015. Joint venture partnerships building homes and high rise flats need not worry their properties will sell.

Investing in construction as well as UK land or all other aspects of real estate may be at a critical moment in Britain - the opportunity is great, the market very strong and the overall economy appears to be on the upswing. But as with any investment, it’s most wise to speak with an independent financial advisor to learn how a position can affect a risk-exposure profile.

UK Strategic Land: The Attraction for Global Investors

By Kevin Ballard

Volatility abroad drives an interest in English property. But domestic demand for housing is just as strong - and long-term - a factor for investors.

Seven years after the global financial crisis and the recession that followed, the times could not be more challenging for investors. There is much uncertainty and fear in global markets.

We don’t have to look far to see major economic problems in Europe with the situations in Greece, Ukraine & Russia all well documented. The opportunist has always looked to the BRIC economies for reliable growth. Today, however, we see that despite a new government, Brazil is still struggling with no signs of improvement and Russia is having to deal with UN sanctions & falling investment. Whilst India has had a bad time, it is showing signs of growth but the once reliable Chinese markets are in a state of disarray. A bear market and a devalued Yuan do not bode well. Even in the U.S. where markets have shown steady growth toward record highs, there is cause for major concern due to a combination of China’s slide and historically low global oil prices. Both Warren Buffett and Gerald Celente (Trends Research Institute) are forecasting a crash or major correction in the US Market before the end of 2015. Only time will tell if they are correct but their records are pretty good!

It is in conditions such as those outlined above that the demand for non-market correlated funds increases. Non-correlated real assets, which include market-traded REITs, buy-to-let residential holdings and investments in the house-building sector (raw land, strategic land development and homebuilder firms) can provide that balance within a portfolio.

There are some fundamentals well known to both British and overseas’ investors. Stable governments and economies such as in the UK still provide security and predictability to global investors. Also, land and property are finite and are historically smart, non-correlating real assets that counter market volatility.

Due to population growth and youthful demographics, alternative investments in the UK is housing is particularly intriguing. Population growth and demographic factors are key reasons for such high demand. The Census 2011 revealed a net population increase of 7 per cent over the preceding decade, the largest population increase since census began almost 200 years ago and this certainly places pressure on existing housing stock. The ONS predicts population growth of over 17% in the next 20 years and with house building at its lowest rate in over 60 years the UK government is now referring to UK housing supply as being in ‘a state of emergency’. Increased immigration, higher birth rates, lower death rates, and an increase in single person households all combined with decades of undersupply have contributed to the current UK housing crisis.

There are many reasons as to why there is such high demand for homes while supply lags behind demographic needs. Suffice it to say that owners of land and built properties, investors and homeowners alike, are seeing high returns on their investments. London residential real estate is fetching prices more than 30 per cent higher than in 2007, before the financial crisis of 2008 and the recession that followed. Growth in prices outside London is also picking up steam now.

Still, why would an investor put money in the housing alternative to the stock market? Why would investors from within and outside the UK specifically look to diversify their portfolios with something such as property funds? How does strategic land investing serve both the investor and the high demand for homes?

To begin with, many investors simply like diversity, for all the reasons commonly cited and recommended by financial advisors. For an investor, finding land where new homes can and need to be built often provides a relatively quick upswing in asset value. A strategic land investment can turn empty fields into housing in five years, sometimes half that time.

But the situation in the UK goes beyond the norm, as critical factors are lined up behind real estate investing. They are:

The undersupply of housing needs at least 10-15 years of aggressive building - Virtually all observers and analysts echo what UK property fund managers tell their investors, namely: it will require construction of at least 200,000 homes every year for years to come to catch up with market demand. The country currently needs about one million new dwellings and will require even more in the future.

This is not just in London - in fact building is more likely to occur in places such as Manchester, Leeds, Peterborough, the South Coast, North West and the North East because of shifting populations of young people and growing economies in those areas. The inflated costs of housing and doing business in London have finally reached a point where tech companies, companies in transportation and the energy sector, as well as university spin-out firms, are happening outside of the Capital City (example: the University of Southampton’s medical research has spawned Karus Therapeutics, Synairgen, Epi Gen, Capsant and iQur, all generating jobs on England’s South Coast as they forge a healthier future on a global scale).

Government programmes to encourage home buying are working - Help to Buy, initiated in 2013, is helping thousands of younger buyers get on the property ladder for as little as a 5 per cent deposit. The Starter Homes initiative will enable both the construction (through an expeditious planning process) and purchase of new-build homes on brown field land at a 20 per cent discount rate to first-time, under-40 buyers. And the Help to Buy Isa enables near-future homebuyers to save a deposit with a Government contribution. With more qualified buyers gaining access to financing, property fund investors and builders have a bigger market to serve.

The planning process is improving - According to a 2014 report by planning consultancy Turley, the success rate of planning appeals for all types of development has risen from 35 per cent to 42 per cent in the two years after the National Planning Policy Framework (NPPF) came into force. Approvals of residential development of ten or more dwellings grew even faster, from 58 to 67 per cent approvals on appeal. The move to localism is indeed freeing up more land for building.

With stock markets on a volatile path and with some of the industry’s most influential investors/forecasters warning of a global market crisis I hope that financial advisors have taken a diversified approach to client portfolios. To use a Warren Buffett quote ‘’only when the tide goes out do you discover who's been swimming naked’’.

England’s North West: What Rising Rental Values Might Mean There

George Osborne’s vision of a “Northern Powerhouse” might already be having an effect. It could mean the advance of cities outside of London is underway.

The Kent Reliance Buy to Let Britain Report, a key reference point for private landlords in the UK, had a startling figure in its May 2015 edition: England’s North West region provided by far the highest current yield of 7.1 per cent. Yields are a measure for long-term property investors, a number that highlights the level of income (rent) received on a property relative to the value of the property.

For large and small investors interested in real asset funds, this is worth noting. Many investors in residential property do so with an eye on income, which this number - one month’s result notwithstanding - suggests can be maximized in an unexpected place.

The characteristics of property in the North West, much like many areas outside of London and the South East, are that those assets - existing buildings and land - are priced relatively low. But the fact that rental income is strong in places like Allerdale, Workington, Manchester, Merseyside, Lancashire and Cheshire suggests something important. If rents are rising there, the greater demand on the housing stock will cause those properties to increase in value over time.

And that might be already happening. While single-month indicators do not predict long-term trends, The Telegraph reported Land Registry statistics in early June 2015 regarding price rises from March to April: “Home owners in the North West benefited from 2.1 per cent growth [in prices] and those in Yorkshire & The Humber by 2.7 per cent – the largest rise of any region.” The Land Registry numbers were smaller for the East (0.3 per cent rise) and the South East (0.8 per cent).

On a somewhat larger scale than the one-off buy-to-let landlord, investors in UK property funds pay heed to local and regional economic trends. If they can buy land before the area experiences growth, they make more money. Property funds typically acquire land that is unused and ready for planning authority approval for a new use. If the goal is housing to accommodate a growing economy, the signs of growth are often found in both the native industries and those that will benefit from Government stimulation.

The North West economy is historically based on a broad variety of things: salt, chemical manufacturing, energy (renewables, nuclear and fossil fuels), food processing, pharmaceuticals, shipbuilding, transportation and tourism in the Lake District.

The district recently received a boost in Government funding to improve the Port of Workington, which will enhance the shipping capabilities of the region as well as the local manufacturing sector. In addition, Chancellor George Osborne issued a blueprint for growing the British economy in mid-2015 that contains a prominent directive to promote “a rebalanced economy and a thriving Northern Powerhouse.”

What might that powerhouse include? Osborne’s ideas include the following:

• Devolved powers to Greater Manchester, including consulting on Sunday trading and planning powers.

• Providing a statutory footing to Transport for the North (TfN), a focused remit “including working to introduce Oyster-style integrated and smart ticketing across the North.”

• TfN will be underpinned by £30 million of additional funding over three years to advance its work programme. TfN will also have a Chief Executive and Chair.

• TfN will also push forward plans to transform east-west rail and road connections and explore options for a new Trans Pennine Tunnel.

In summary, Osborne says “the Northern Powerhouse is a vision based on the solid economic theory that while the individual cities and towns of the north are strong, if we enable them to pool their strengths, they could be stronger than the sum of their parts.”

Is a property fund the best way to invest in UK land? Individuals should consult with an independent financial advisor to set broad strategies as well as to consider individual investments.