What "Good Growth" Factors Make UK Cities Attractive to Development?

Jobs, income, health and housing are among the top priorities to UK residents. This is why businesses and workers are relocating to places other than London.

The Tech City UK Cluster Alliance, an industry group focused on the development of the technology sector throughout the entire country (i.e., outside of London), issued a surprising report in early 2015. In the analysis presented in "Tech Nation, Power the Digital Economy 2015," the CEO of the group revealed that 74 per cent of the country’s digital businesses are outside of Inner London, with 21 digital clusters of innovative enterprise in as far-flung places as Edinburgh, Cardiff, Newcastle, Belfast, Hull and Bournemouth & Poole.

But that's not to say the entire future of Great Britain rides on broadband and wireless technologies. Getting past digits, the world still needs widgets - and the people who make them, the lorries that distribute them and the ships that sell them across the globe. The savvy investors may find their gold in technology, but they are just as likely to make a good return on assets in other sectors. Just ask those who are making alternative investments in UK land - even tech companies need to build data centres and office buildings, and their employees need homes to live in. Growth necessarily requires land on which to build.

This all speaks to a generalised approach to decentralisation and focused efforts by the Government to encourage growth throughout the country. London has become unaffordable and in certain respects unsustainable, what with global investors buying up much of the luxury housing and driving up the costs of doing business because employees need to be paid much more in order to afford living there.

In another study, the consulting firm PwC joined together with think-tank Demos just a few years ago to look at what makes for sustainable growth in UK cities. What they found was a host of factors that neatly define what will enable a Cardiff, for example, to grow its tech sector but also be a place where a diverse array of businesses can perform over time - including through economic hiccups that might cripple a single industry-centric town.

The PwC/Demos study was presented in "Good Growth for cities, a report on urban economic wellbeing" (November 2012), based on a survey of the general public, business leaders, politicians and policy makers, combined with available data. The key factors defining a healthy local economy were the following:

Jobs - Considered the number one priority, well-paying employment enables almost everything else. Income and jobs were considered together (and thus weighted in the indices of the report) to account for about one-third of what defines a good growth city.

Income - While the importance of this cannot entirely be extracted from the same feelings about jobs, the distinction might be made that good pay scales certainly trump lower wages. The nature of a local economy and the relative factors of education are important contributing functions.

Health - Still largely linked to income but also to access and adequate local facilities, health was considered by survey respondents to be mostly at a par in importance with income. The two factors also are strongly correlated in that cities with higher incomes report better satisfaction with their health.

Time with family - Surprising to some, this ranked so high that a large portion of working people said they would forgo some income in order to spend more time with family. Londoners who work long hours and endure long commutes are most disadvantaged in this regard.

Housing that is affordable - This factor is often inversely related to other success factors (jobs and income), even though many claim it as a priority. Cities such as Bristol, which has attracted investment and jobs, ranks low in housing affordability; this might hamper its future growth, a "Londonisation effect," so to speak.

Income distribution - As defined by the ratio of median to mean income, London scores low because of the pay disparities between service workers and highly compensated executives in the inner neighbourhoods. In some of the outlying boroughs, income distribution evens out a bit more, as it does elsewhere in the country.

Economy wide sectoral balance - This is about the share of manufacturing to total output, a means to assess the diversity of the business sector.

Environment - Largely measured as carbon emissions relative to GVA (gross value added), Bristol, Edinburgh and London received the best scores in this regard. The study authors suggest assessing sustainable growth holistically by incorporating environmental measures together with social and economic issues.

Transport - Average commuting time to work, a factor which scores lower where housing costs are unaffordable and the cities are bigger.

Future - Technically "providing for future generations," this measures the per cent of households where long terms savings such as ISAs and stocks and bonds are held that can benefit children and grandchildren. It roughly correlates with income and income distribution scores.

Important to consider is how London ranked "average" or "below average" on all but three indicators (income, health and environment). Why? The Capital City's lack of affordable housing, long working hours and congestion are hugely negative offsets to higher wages there. If somehow homes can be built near jobs, that would change.

UK Capital growth land opportunities are strongest where the metropolitan area growth is healthy within the foreseeable time period. Of course, land must be available and those orchestrating development need to understand what those cities already are planning to accommodate and support growth. In places such as Bristol, where growth is high but housing lags behind, it is likely a good place to invest if the land is available.

Investors should consider the local economies of where building is proposed, as well as their own personal wealth-building objectives and variables. An individual financial advisor can help balance those considerations.

What Does the UK Cities House Price Index Show Strategic Land Investors?

The price of housing is climbing to unsustainable levels in certain key UK cities. This is bad for employers and workers - but perhaps an opportunity for land investors.

The prices of homes in London, Bristol and Cambridge have risen much higher than the UK average in recent years. This causes difficulties for would-be homebuyers and for employers - suggesting opportunities for homebuilders and land investors, while posing important policy questions for public officials.

Of course the challenges created by the housing shortage in the UK have many causes - greenbelts, height limitations on buildings in London, social housing policy, lending limitations and the financial crisis of 2008, all against the backdrop of a rapidly rising population. One proposal is to simply expand London’s built environment one mile into the greenbelt that surrounds it; that could add one million new homes to the housing stock in a place where the housing shortage is most critical. Investors who engage in real asset investing are chomping at the bit at such an idea, as they are accustomed to turning raw land into infrastructure-supporting housing and commercial development. But such a concept would naturally face much resistance from those who enjoy the benefits of living on the current greenbelt boundaries.

The first UK Cities House Price Index provides good perspective on the scenario as it affects both London and the rest of the country. As it turns out, the outsized cost of housing is pronounced in London, Cambridge and Bristol, skewing the country’s averages in ways that both overstate the national housing cost landscape while under-representing the more dire situation in these three population centres.

Developed by Hometrack, a residential property market specialist, the UK Cities House Price Index encompasses house price growth across 20 cities. In the first Index report issued in November 2014, the study found that urban house price growth in the preceding 12 months (November 2013 through October 2014) was 13.2 per cent across the board. However, counting the growth rate in smaller towns the national home price growth rate is less at 8.9 per cent.

While this is good news in less populated places, the problem remains critical in places such as the capital city. What are the effects?

• Household formulation is postponed, as younger people cannot afford to move from their parents’ abodes to form new families.
  
  
• Employers in the larger cities bear greater costs. Former Labour housing minister Nick Raynsford told the Financial Times that employers are talking to him about how housing prices affect their businesses and workforces. "We need to ensure that there is enough supply of labour for London’s needs,” he told the newspaper. “This is a really serious issue, with people forced to move further and further with a longer and less reliable journey into work.
  
  
• Lower-paid workers have disincentives to work. According to the policy officer at Shelter, the housing charity, some people at the lower end of the economic spectrum are travelling two hours each way to get to jobs. This probably has the effect of discouraging working and increasing reliance on public benefits instead. Shelter research also indicates that some central London councils are moving homeless people to distant places such as Exeter and Manchester where renting costs were lower.

As the difficulties and costs of the insufficient housing stock continue to build, it's likely that at least some employers will consider relocating to parts of the UK where housing is more affordable and there are more workers to choose from. Paying close attention to this are UK land fund managers, who assemble investors to acquire and develop land on which new homes can be built. As statistics show, the demand for new homes varies by region, but homebuilders and their financial backers are able to identify where the best opportunities will most likely yield good results.

Investors who are interested in land and building might appreciate optimal returns while working with experienced specialists who understand the business very well. But they should also speak with an independent financial advisor to see where those investments fit into a broader wealth-building portfolio.

What Does the Crossrail Commuter Project Tell Us About Strategic Land Investing?

Land values along the Reading-to-Sheffield line in Essex have increased by 96 per cent, demonstrating the pent-up need for housing in strategic UK locations.

Crossrail, the new, 75-mile east-west commuter train line set to become operational in 2018, is highly anticipated by the people who will see their travel times reduced and made more comfortable. As land values along the new line and nearest its stations increase, so too does an awareness of how UK land and home values can rapidly increase with easier workplace access.

The line means that an additional 1.5 million people will be within a 45-minute commute of London’s key business districts. But expanding commuter rapid transport is about more than helping people travel faster. Where new commuter rails go, new homes are sure to follow. This is due in no small part to the 96 per cent valuation increase to homes in these areas over the last ten years– a rapid increase that developers and investors in UK strategic land recognise as significant (note: this statistic is from eMoov, the online real estate firm, based on comparisons to when the project was first actively discussed a decade ago).

Individuals and institutional investors understand the economics fairly well. Where there is work, there needs to be sufficient worker housing. In the UK, there is a distinct shortage of homes in general but not since the post-War period has there been as stark a shortfall in the availability of housing.

Growth in employment and the availability of housing is almost never in perfect sync. Consider these two disparate factors as measured in 2012 through 2013 from the Government’s Office for National Statistics:

Job growth post-recession is robust in some places - The top ten highest job growth areas are naturally concentrated in the London metro (Westminster, Islington, Tower Hamlets, Hackney, Camden and Lambeth), but also include Manchester, Birmingham, Leeds and Milton Keynes. The occupations that are growing fastest are in the professions, science and technical fields, followed by accommodation and food services and information/communications jobs.

Housing is in abundance in the wrong places - There are too few homes in some places and many under-occupied houses in others. Where there aren’t enough homes, larger families (including multiple generations of families) occupy smaller homes and flats; there are 1.1 million households categorised as overcrowded, most in privately rented or social housing, but some in owner-occupied homes as well. And yet, there are an estimated 16.1 million households with at least one spare bedroom. These under-occupied homes are largely in the Midlands or in the north of England (Rutland, South Northamptonshire, Rushcliffe and elsewhere), while local authorities report the areas in and around London as the most over-occupied. These include Newham, Brent, Tower Hamlets, Haringey and Waltham Forest.

To the investors, such as those involved in joint venture partnerships, that seek planning authority changes to land use (converting unoccupied space to that which is zoned to residential and commercial development), these asymmetries spell opportunity. New transport lines and growing businesses always spell a shift in where people work and live. The response by investors, developers and homebuilders is to provide the kind of housing that are needed in dynamic economies.

Investors need to look beyond simply where development might provide a high yield in asset growth. They also should consider where real estate might fit within their personal wealth-development agenda. Speak with a personal financial advisor to discuss factors specific to and external of the investment.

What are Key Characteristics that Foster Sustainable UK City Growth?

Simple economics of wealth and productivity do not indicate which urban areas can sustain healthy growth. What’s clear is the action is outside of London.

Anyone looking to make money in real estate naturally looks for growth. Farmland and urban brownfields generally do not provide as good a return on investment as they might if the land is granted a change-of-use to residential or commercial zoning.

That's why individuals who work through such schemes as joint venture land opportunities typically are drawn to areas of growth. And while that typically correlates with job growth, there are other factors to consider, according to the City Growth Commission, a 12-month enquiry into how UK cities can be empowered to drive local economies. While conducted to inform voters in the UK General Election, the report can also be used as a guide by land investors of UK land.

The Commission's report, "Metro Growth: The UK’s Economic Opportunity” (February 2014) takes a critical look at the allocation of the country's political economy. It contends that with so much centralised power in London, the other, very capable cities in the north and west (in particular) are too dependent on public sector funding. Instead, the Commission argues for complementary growth outside the Capital City. The process is one of devolution, allowing policy-making powers to be held by the cities and to emphasize the assets that these cities already have.

To be clear, it is well known that a certain degree of organic growth has been happening in places such as Edinburgh, West Yorkshire, East Midlands, Bristol, Merseyside, Greater Manchester and Belfast. A large per cent of the tech sector, for example, exists outside of London. The report notes that mid-size cities (population 200,000 to 2 million) are projected to create the greatest degree of GDP growth through the year 2025.

One of the core characteristics of healthy growth - another word is sustainable, in the social and economic sense - is housing. The Commission findings on this include the following:

Increasingly urban population - Already, about half the UK population lives within the 15 largest metros (the Commission preferred use of metropolitan area measures, which go beyond official city borders). There is little reason to expect this trend will not continue.

Planning and housing are fundamental - Firms based in city centres, London as well as others, feel the planning policies that historically constrained outward growth are now responsible for higher costs related to transport and housing. While providing due credit to the country’s preservation of Green Belts and heritage sites, the Commission argues for better local flexibility in planning - including and especially toward the goal of increasing the inventory of homes. Social housing needs to be in the mix, as well private housing being built by joint venture investors.

Devolve planning - The previous administrations effectively created national governments for Wales, Scotland and Northern Ireland. The same process is underway in allowing greater latitude and decision-making powers to local authorities in the cities.

Economic policy focused on networked cities - Instead of planning and allocations of resources that bolster the country as a whole, a redistribution of economic powers from Regional Development Agencies (RDAs) to Local Economic Partnerships (LEPs) was a first step. But ultimately, a successful UK economy might instead involve a network of mutually reinforcing, complementary and connected metro regions.

Such points regarding localisation are at the core of how strategic land partnerships foster smart development. The entrepreneurial nature of private investors and land development specialists is enhanced when they can work with less bureaucratic local planning authorities. When several acres can become much needed housing that allows people to live closer to their places of employment, the benefits are far reaching. The employer is less constrained in its growth, an important tailwind to growing the local supply chain and the overall local economy.

Would-be investors in real estate need to focus on macro and microeconomic factors, not the least of which are their own wealth-building strategies. That is information that should be discussed with an independent financial advisor.

The Role of Strong Urban Infrastructure in Growing UK Cities

How important are good transport, housing and other infrastructure in cities’ growth prospects? What does this mean to developers and homebuilders?

To the investor with sufficient resources to engage in UK land investing, the primary interest is in housing. Where is it in greatest demand, and where will local planning authorities be predisposed to grant changes that allow a conversion from another use (such as agriculture) to property development?

There is a housing shortage almost everywhere in England. The more nuanced investment strategy looks beyond simple demand to find the growth markets, where demand is greater and where buyers will be able to afford new-build properties. Before an investment group will buy land and begin building, they need to know where buyers exist and where local councils are predisposed to development, as evidenced by other infrastructure progress.

A 2011 report from the PwC Public Sector Research Centre, "Making it happen: A roadmap for cities and local public services to achieve outcomes," advised city planners and leaders to identify and build a competitive position in order to compete in the 21st century. The report authors recommend that building infrastructure - public transport, roads, broadband, ports - be high on the list of things that achieve that competitiveness.

The report adds that other growth factors include social, intellectual, environmental, cultural, political/participatory and Internet communications technology. Manufacturers need roads, rails and ports to ship goods and receive inputs. Information companies need ICT as well as bricks-and-mortar for housing and transporting workers. The service industry needs infra for customers as well as employees.

Who does this well? The PwC report identifies a handful of cities doing a good job on infrastructure measures. They include Aberdeen, Belfast, Newcastle, Nottingham and Swansea Bay. Cities performing "below average" are Birmingham, Bristol, Manchester and London.

Another way to look at future-forward planning and growth are those places where green infrastructure is employed. This is where natural systems such as trees, bioswales, green (vegetated) roofs, community forests, parks and wetlands are strategically placed. According to the Department for Environment Food and Rural Affairs (DEFRA), these features mitigate air pollution, excessive summer heat and winter freezing, and excessive stormwater and add to the quality of life in a city. DEFRA studied this internationally in 2012 and cites two examples of green infrastructure in the UK that added to the local economy. One was the Glasgow Green Renewal, a park renovation that had a measureable effect on local real estate values and which led to a 16 per cent increase in businesses in the adjacent neighbourhood (far exceeding the 3 per cent experienced citywide). The second UK project was the Canalside development in Birmingham City Centre, a remarkable aesthetic improvement with the conversion of a utilitarian waterway into a tourist asset. The waterway proved to be a catalyst to land investors who built 2,440 residential units, 444 hotel bedrooms, and 16,400 square metres of commercial space in the vicinity.

Building better infra is not a simple matter. Not only do communities and municipalities need to get on board, but so too do investors. The chief investment officer of infrastructure debt at Allianz Global Investors says that much infra investment is dependent on projecting financial returns decades into the future. This can be challenging in that infra valuations might change over time, such as with shifting modes of transportation adding loads in one sector (public transport?) while lightening it in others (fewer car drivers place less demand on surface transportation and amenities?).

What bears noting in both UK green infra programmes: where these public-accessed features were built, private investment followed. Real asset investing often works that way.

By some definitions, housing is considered infrastructure as well. Of course socialised housing falls into that category, but so too do privately built, privately owned homes. The investor who finds greatest returns from physical assets such as real estate often enters a symbiotic relationship with a city or town - the more homes built, the more attractive a place is to employers, commercial enterprises, and sometimes tourists.

Whether investing in infrastructure, homebuilding or other forms of real assets, the individual is urged to work out a strategy with an independent financial advisor. Tax implications and relative risks need to be discussed in advance.

Smart Workers in the UK: How University "Spin-Outs" Support Metro Growth

Great Britain’s world-renowned universities create jobs in many ways. Real estate investors need take note, as those job creators need buildings.

About a decade ago there was a great deal of discussion on how higher education institutions, HEIs, can affect a local economy with "spin-out" companies. These are the entrepreneurial ventures that arise from research and other intellectual products that universities naturally produce.

Those discussions were well placed, given how spin-outs have been remarkably successful. This takes the value of universities to a new level: where once HEIs were a good employer providing a baseline of economic benefit to a city, they now spawn new businesses that stimulate local economies in all the ways that growing enterprises do.

To the individual drawn to UK alternative investments, it might seem like a smart idea to identify where those ventures are and how to get involved early. Indeed, it can be a very smart move - although it bears mentioning that even brilliant innovations from the brightest minds of UK universities do sometimes fail or fail to live up to full expectation. But the investor’s attention might be drawn to ancillary businesses, including the need for commercial and residential real estate development when those spin-out businesses begin to grow.

Examples of successful spin-outs may have already come to the reader’s attention:

Cambridge Nanosystems - Manchester University physicists developed graphene, the stronger-than-steel, lightweight material that conducts electricity and heat for a variety of applications, including in semiconductors. This firm derives the material from waste biogas and is expected to generate £2 million in sales by 2016; it already employs ten people with 20 more hires anticipated in 2015.

Adaptimmune - This life sciences company has drawn £104 million in funding, including from the University of Oxford as well as private equity companies. The Sunday Telegraph reports that venture capital funding for life sciences companies, particularly those spun out from the "research golden triangle" (London, Oxford and Cambridge) reached £527 million in 2014.

PureLiFi - An Edinburgh University spin-out, this start-up has drawn £6.2 million in funding from investors that see a future for its inventive technology that can turn an ordinary light fitting into a LiFi internet access point. It will enable wireless networking in the home of everyday devices such as thermostats and home security systems.

Tandem Nano - From the University of Liverpool, this technology improves the solubility of medications. This reduces the risk of toxicity while increasing medicine uptake in patients.

But despite these successes, and the increasing number of them, a study conducted by the City Growth Commission - a single-project organisation that in 2013 studied factors that help cities and their broader metro areas to thrive - identified one confounding factor. In a research study report, the Commission said "The skills valued by many knowledge intensive service sector firms - including numeracy, analytical capacity, IT proficiency, creativity and entrepreneurialism - are highly transferable across sectors. Universities play an important role in developing these skills and clustering talented people ... Yet graduate retention and attraction strategies are a relatively unexplored aspect of economic development, especially at the metro level."

In other words, keep those growing companies local is not apparently orchestrated by municipal leaders. At best, conditions of the local economy - including the availability of affordable commercial space and housing, for entrepreneurs and their workforces - may play a role.

This might be where the real estate investor can provide more than just property. When property fund partners join together to increase the stock of homes and commercial space where spin-out firms need it, it might have a synergistic effect on boosting the local economy by making it a preferred place to set up shop.

Investors, working individually or in funds, largely get involved in UK property funds to gain good returns on assets. But given the tangible nature of property, it’s hard not to think about the legacy that buildings create in towns and cities. This is a good motivator in alternative investing, but financiers are always advised to speak with an independent financial advisor in order to remain objective about the project.

How Well Are UK Cities Planning for Growth?

Increasing the number of homes in the next quarter century is critical and a focus of the NPPF. But many local authorities have no plan as of yet.

Almost three years into the National Planning Policy Framework regime, there are mixed reviews of how well the programme is working. It was intended to stimulate home building by ceding greater authority to local councils. This is a critical consideration to those who actively invest in development, including homebuilders, as getting approvals for building amounts to a go/no-go equation.

Notably, many of those councils that have no approved plan are building at a faster rate than those with an adopted plan, say researchers with Inside Housing, which reports on social housing and related real estate and land development issues.

The intention of the NPPF was to simplify and expedite the homebuilding process. It dissolved regional planning in favour of local planning authorities (LPAs), who in theory could better plan where new homes and commercial structures should be built. A key requirement was that all local councils establish a five-year plan, one that could signal to investors, such as those working in strategic land partnerships, as to where development would be possible.

But fewer than one in five councils had adopted plans as of October 2014, according to Planning Inspectorate data. The problem, says Planning Officers Society president David Evans, is that writing up a five-year plan often doesn’t work where a more evolutionary process might. Investors who strategically form partnerships to purchase land are often the impetus to these evolutions.

Add to that, staffing cuts in some planning policy teams means this work is unfolding more slowly than the Government would like. "My view is that local authorities aren't dragging their feet," says Alison Tero, director of planning for the real estate firm CBRE. "They're caught out by the changing system and it’s a huge resource issue."

According to Inside Housing’s assessment 167 local councils have a plan that is approved or in process, while 127 councils simply have no local plan at all. Yet in comparing the numbers of homes added in two recent years (2012-2013 vs. 2013-2014), the latter group with no plans increased building by 35.9 per cent while those with plans/plans-in-development by 29.2 per cent.

A review of the Inside Housing list suggests that the councils without a plan tend to be from smaller districts. One standout was Bradford (population 293,000), where without a local plan the increase in building from 2013 to 2014 was a tripling, from 400 to 1,210 homes built. Boroughs with approved plans such as Allerdale (population 93,500) increased their new-build homes slightly (from 270 to 280), and North Lincolnshire (population 167,500) increased by almost 50 per cent (from 190 to 280). The city of Southampton (population 253,600) actually slowed in its growth (from 1,140 to 570), although it should be noted that this council had an adopted development plan as early as 2010, which changes the equation a bit.

LPAs that lack a plan can still permit use changes, and in fact often do in reaction to proposals submitted by private developers (perhaps largely due to the staffing considerations mentioned above). For example, property fund managers are fully able to acquire land, draw up plans for development and build the required infrastructure as needed if the local authorities permit them to do so. But before that permission is granted, public reviews of plans are required. The process may be reactive, but it is transparent and allows for dissent.

Investors in property are answering to a strong demand-driven market, given the serious shortage of housing in the UK. But development is largely stimulating to local economies, enabling employers to base operations where employees might be able to live. This is particularly useful for cities outside the congested South East and London, as growth firms are finding new opportunities in the North, Midlands and West.

Beyond where planning approvals might be achieved, investors in property funds also need to consider their personal asset-building strategies relative to the risks of real estate. A personal financial advisor is highly recommended for that discussion.

How Many Empty Homes are in England - and what Does this Tell Real Estate Developers?

For a variety of reasons, there are many unoccupied residences in the UK. This is deeply ironic, given the housing shortage, but offers insight for housing investors.

A number that is hard to swallow in homes-deficient England is 610,000. That’s the number of residences that sit empty in the country. Some are unliveable and need to be either renovated or demolished. Some are quite ready for occupation and should be brought to market as soon as possible. The reasons there are so many of them are complex and somewhat bureaucratic – and serve as a good lesson for investors who are interested in the overall high demand for housing throughout the UK.

The Empty Homes Agency, a campaigning charity, conducts surveys and advocates for programmes and policies that encourage putting unoccupied residences to work. From research they conducted in 2014, in cooperation with mortgage lender Halifax, we know the following:

The problem is underestimated - Surveyed adults think the number of empty homes is 377,000 when in fact it is almost double that.

Many notice that empty homes blight their neighbourhoods - More than one-third (37 per cent) say that unoccupied residences are an eyesore or reduce local property values.

This should be prioritised by the Government - A wide majority (74+ per cent) think the Government and local authorities should be addressing this problem.

This offers several points for consideration by investors in real estate. For example, anyone interested in alternative investments such as UK property funds should recognise that there are bottlenecks in the system that could and should be overcome. Whether it is about bringing empty homes onto the market or converting raw land to residential construction, obstacles need to be overcome. The local planning authorities have a large role to play in all of this.

Investors also should look at the variety of ways in which this problem can be tackled. Incrementally, the Empty Homes Agency has advocated for several things. One is that homes sitting empty now are subject to imposition of a 5 per cent tax after two years (previously, it was three years). Empty Dwelling Management Orders can also be applied in two years by local authorities (previously it was three years). In 2011, the Government allocated £235 million to allow registered housing providers to renovate and repair empty properties and be repurposed for affordable housing. The Council Tax can be increased to 150 per cent on properties that are unoccupied and unfurnished for two or more years, which can be levied on high-value homes held by foreign and domestic individuals as land-banked investments only.

What does this mean to anyone involved in new homes development? First, the housing shortage is to be addressed on multiple fronts. Build affordable flats and luxury homes - the more the better, as the basic problem is one of (low) supply and (high) demand.

Second, that Government policies and programmes play a critical role. Local councils have discretion on imposing Council Taxes. They also can, through local planning authorities (LPAs), choose where to build new. Developers working through alternative investment funds can astutely propose where adding homes will have the best impact on the local economy and least burden on existing infrastructure (or add to that infrastructure at the developer’s expense). But that can only happen with those LPAs on board, properly informed of the benefits of building new as well as refurbishing existing homes. Recently instituted national programmes such as those in the National Planning Policy Framework (NPPF) strongly encourage pro-development practices on the local level. But it very often takes investors and builders to lead the charge.

Investors have many things to consider when choosing projects and instruments. The high demand for housing in all forms and at all prices is certainly attractive, but consulting with an independent financial advisor on all such investment decisions is strongly recommended.

How Do Trends Toward Teleworking Affect Homebuilding in the UK?

Location formerly determined the value of most real estate. But technology now enables working from home, altering the need for homes to be near workplaces.

The key driver in building new residential communities, in the UK as elsewhere, has historically been about proximity to workplaces. But to what degree do trends toward telecommuting (a.k.a. telework or remote work) affect that? When employees can work from anywhere a broadband connection reaches, does this alter the equation – making, perhaps, the location of housing irrelevant?

This is a particularly interesting phenomenon from the perspective of those engaged in developing housing on a large scale. Opportunities for capital growth abound for UK land investors and communities where employment is growing and where land can be converted from under-use to homes and commercial properties. If the matter of proximity to transport and workplaces is of lesser importance that then suggests that homes can be built in locations where other factors are more favourable (such as lower-cost land, lower development costs overall, and access to other amenities such as recreation and education that may not be available elsewhere).

It helps to review the statistics and trends. The phenomenon of working from home is trending upward, but there is a mixed picture in how that actually affects companies, careers and living arrangements. Consider the following:

• More employers are offering teleworking than ever before - From 2006 to 2011, the number of employers in the UK who offer teleworking rose from 13 per cent to 59 per cent (source: CBI, UK business lobbying organisation). Another benefit to employers is that they can save money by reducing their overall rented office space (the average real estate savings is about £6,400 per worker/workstation).
• More employees want to telework than ever before - Younger people who make up a large part of job-creating growth industries (particularly in the tech sector) place higher values on flexible work arrangements, according to a meta-analysis of 500 research studies on telecommuting practices and attitudes made by the firm Global Workplace Analytics. One study showed that of 1,500 technology professionals in a survey, 37 per cent would take a 10 per cent pay cut in order to receive work-at-home privileges. And why not? Their savings in commuting costs and hours may well make up for that 10 per cent loss in income.
• Teleworking is rarely an exclusive mode for most workers - For various reasons that include career impairment (bosses may be more inclined to promote the people they see and not those they communicate with only electronically), most workers recognise the need to be physically on-site with employers at least part of the time. But that varies by company: Sir Richard Branson of Virgin Airlines wholeheartedly embraces it, while Yahoo CEO Marissa Mayer began phasing out the practice in 2013. Only in companies such as call centre firms are complete teleworking arrangements maintained; of course for a large portion of the self-employed their homes are their workplaces.
• In two-earner households, it’s rare for both to cyber-commute - It’s still more the exception than the rule that a worker will have teleworking arrangements with an employer. Even more rare would it be if both heads of a household had those same privileges. So in younger families – those that have the income required to buy a home – at least one wage earner would need to slog their way to work by normal means (car or public transport in most instances).

So for developers, investors (for example, property fund managers) and homebuilders, the word is that location still matters, but perhaps a little less so than ten years ago. Where this will trend in the future is anyone’s guess, of course.

Investors drawn to the high-demand housing sector should consider the location of a proposed residential building project among many other variables (likelihood for planning authority use change permissions in particular). Speak with an independent financial advisor to get a fuller perspective on where land and property investments might help achieve overall financial objectives.

How Do Growth and Residential Construction Reduce Poverty for UK Cities?

Private investment in housing is largely about asset growth. But by fostering construction and new homes, the investor also plays a role in poverty abatement.

If the price inflation of food since the 1970s was as great as that of housing in the UK, a chicken in 2015 would sell for £51, a leg of lamb at £53 and six bananas would cost £8.50. Which is not a bad deal for long-time homeowners, but not so good for first-time homebuyers and anyone stuck in the rent trap.

Economists and the country’s leading housing advocates echo each other where it comes to the price of housing overall, whether one is able to buy or trying to rent: the increasing share of pocket that goes to shelter is making it much harder for citizens of the UK to pay for fuel, food, other necessities and consumer goods. Further, Government spending on housing benefits are soaring as well, while employers in central London say their wage costs are rising because it has become difficult to find staff able to travel into the city. Because they cannot afford to live there, they must live great distances away from their workplaces.

By every calculation, the cost of housing is a near-pure expression of supply-demand principles. London has historically limited tower height, the greenbelt has restricted sprawl, and brownfield remediation costs have limited building on what sites there are. So without supply to answer a growing population, the price naturally rises. Investors working through strategic land partnerships throughout the UK seek places and ways to add to the housing inventory wherever possible.

In response to these housing economics, younger people and employers are moving out of the capital city. The Office for National Statistics reports that 58,000 people in their thirties left London in one year (2012-2013), heading for lower-cost cities that include Birmingham, Bristol, Manchester, Nottingham and Oxford. A 2014 survey of a network of entrepreneurs, the Supper Club, indicated that 40 per cent say the cost of housing is driving away their best employee prospects; almost half said that housing and transport costs lead them to consider moving their businesses elsewhere.

Those difficulties trickle down to lower-income workers and residents. The Joseph Rowntree Foundation, which advocates an end poverty and injustice, states that “housing costs constitute the most important and most direct impact on poverty and material deprivation.” Other studies and charities add that the costs of substandard housing lead to fuel poverty while inefficient heating systems add carbon to the atmosphere. Poorly insulated homes cost a greater share of disposable income to those who can least afford it.

How do investors - individuals as well as institutions - make a positive impact on this? By building. By increasing supply and by building better. They construct more efficient homes that provide more options for living, in and outside of London and throughout the country. If the housing stock is more favourable in Manchester, the entrepreneurial class might be more drawn there, set up their shops and grow those local economies – affecting not only their employees but in the ripple-rings around them: shopkeepers, cafés, auto dealers and service personnel, schools, hospitals and leisure activity providers. Each of these things are affected when better housing is available everywhere - something that is directly affected by people investing through real asset funds, REITs, homebuilders and other methods.

Individual decisions on where to invest are best guided through an independent financial advisor. Their role is to assess the specific investment as well as how it can affect your overall asset accumulation strategies.