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.