The UK pledges to build 1.5 million new houses in 5 years. Despite the low growth rates in the UK economy during the last decade, the newly elected Labour government plans to unveil an October 30 Budget to boost the UK’s economic growth and housing supply.
The UK residential housing market has fallen short of catching up with the demand for a long time. In 1977, Britain was able to build over 300k new homes within a year for the last time, according to ONS data. The UK has not built 300,000 homes a year since 1977.
The building performance of the ’60s and ’70s was carried by the vast efforts of the Local authorities’ development appetite. Since then, the builders have slowed well below 200k a year, and the supply has been unable to create sufficient roofs for the residents in demand. Even the number of small to medium builders fell over a few decades.
There is a long-standing gap between the existing houses and the demand for housing. If you dare to name this term, it is almost four decades of slowness.
Therefore, new housing reform is a priority and commitment of the new Labour government along with economic growth, and it should be addressed firmly and in no time. Otherwise, Britain may raise a strong voice for unsolved housing needs.
The UK is eager to bring back “growth” built on stability, investment and reform. This job is mandated by the newly elected Labour government and is asked to move at speed to fix the foundations of the UK economy.
Housing is where change begins.
The goal of building 1.5 million new homes demands that the UK unites for land development, less bureaucracy, faster planning, access to funding, and a new cohort of construction workers and builders.
The coming international investment summit on October 13 is the first stop where Labour aims to attract a fresh funding injection to the UK economy. Global investors, businesses, and ministers will come together to discuss this further before the release of the Budget on October 30.
We may pencil in the date, November 1, in our diaries as day one of the race to 1.5mn new homes begins.
Early funding for brownfields is a green light.
The race to build 1.5 million new homes is a game in which state, individual, and institutional investors should go all in. However, the best part of this challenge is that it should be a win-win race. The low-hanging demand is there, and the market is already experiencing a critical housing shortage. In other words, there is a potent resident for every new house to be built. Every stakeholder may be able to benefit.
In a recent example, a deal has been hailed by the UK government to raise funding up to GBP 1 billion in a build-to-rent partnership. The UK pension fund Nest joins forces with insurer Legal & General and Dutch fund manager PGGM to build and manage rental properties.
The partnership has committed to building and managing rental properties on city-centre brownfield sites with an initial investment of GBP 350 million.
Nest is a state-backed UK workplace pension fund that now aims to penetrate the build-to-rent sector. L&G had already plugged GBP 3 billion of capital into the build-to-rent sector and created more than 10 thousand rental homes since it began a partnership with PGGM eight years ago.
It seems these types of build-to-rent partnerships will increase soon.
In conclusion:
There are two quick takeaways from this example.
Firstly, city-centre brownfield development sites in fast-growing UK cities will attract build-to-rent investors – should you better ask why they are throwing in money now?
Secondly, individual investors will also benefit from high returns from buy-to-let opportunities offered by a new cohort of builders when and where they find valuable off-plan independent developments in UK cities. With interest rates easing, it looks like there will be a first-mover advantage in the following years.
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