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Strategic Land: Invest Now, Profit Later

  • United Kingdom
  • Real estate

17-08-2020

Despite the Covid-19 crisis, most of the dynamics of a strong housing market still exist in the UK. They will be all the greater as we emerge from this temporary shut-down of our economy.

Lockdown and social distancing have slowed production and disrupted supply chains, so the undersupply of housing will be more acute than before.

Affordability may also improve if the government decides to jump-start the economy by supporting the housing market. The UK economy, more than almost any in the developed world, hangs on the success of its housing market. Successive governments have recognised this and made pump priming housing their first move in recovering from almost every downturn. This government stands firmly in that tradition, as shown by the discussions that have already started to extend Help to Buy. Encouraged by Help to Buy and the active intervention of agencies like Homes England, demand may well recover to pre-crisis levels more quickly than expected.

Buyers will focus much more on the quality of their home environment, and seek out the well-designed new homes that our UK housing industry supplies. Designated areas for home working, good internet connection and gardens will all be at a premium. As part of that, more buyers may try to move away from our city centres for a better quality of life with less commuting.

There are obvious downside risks though, which it will take a large government stimulus to avoid. It seems there will be an inevitable and sad increase in redundancies and a rise in unemployment, perhaps falling especially hard on the travel and hospitality industries. But we must hope that the economy will recover quickly next year, as people will want to enjoy the freedom to socialise and travel in the UK again. Then jobs in those sectors will begin to return, at least on the home front. Foreign travel will be slower to recover. However, the short-term boom in staycationing should provide a strong stimulus to both the UK hospitality industry and the wider economy. A combination of these medium-term uncertainties and the UK’s long-term need for housing make strategic land for residential development a highly desirable investment vehicle. The capital outlay to secure a strategic land position is much lower than when buying immediately developable land. The timescale for strategic land to come to the market will in many cases match (and indeed can be planned to match) the inevitable upturn in the economy.

Many of us in the industry will be kept busy securing these opportunities, and now is the time to seize them. House builders, strategic land specialists and investors need to make sure they don’t miss out on the immediate opportunities in strategic land. I have been through several downturns now and, in every single one, those who have seized strategic land on the way down have made the most money on the way up.