UK Prime Minister Keir Starmer has made an ambitious pledge to construct 1.5 million homes in the next five years in order to address the nation’s housing crisis. The outlined plans will give local councils targets for around 830,000 new houses every year in their areas. But what does this mean for investors?
Herein, we take you through five key talking points to ponder.
1. More opportunities for investing social housing
With the regime planning to expedite building permission with the help of local councils, now, more than ever, is the best time to invest in social housing. Why? The biggest selling point is the handoff management of the property, as you hand over the operation to the housing association or local council. That means you won’t be dealing with the ugly side of property rentals, such as maintenance, rent collection, and tenant placement.
The demand for social housing is at an all-time high right now. The No.10 says that roughly 1,300,000 households are on the waiting list for social housing, including nearly a quarter million children. Your investment in social housing will provide good returns given the high occupancy.
2. Positive impact on property loan notes and bonds
Buying loan notes is one of the most stress-free ways to invest in the property market, especially if you’re a busy expat or a retiree. With the demand for new builds going up, property developers and companies will likely issue loans notes with better fixed-return interests and repayment terms. Government-backed projects could lower default risks associated with property developers, making loan notes more attractive to cautious investors.
The large-scale development of residential properties could also affect yields and risk profiles for property bonds. Investors in these fixed-income instruments should consider the potential yield compression. After all, an increased housing supply might stabilize or reduce property prices in certain areas, potentially affecting the returns on property bonds tied to speculative developments. At the same time, Starmer’s plan could spur investments in emerging housing zones like the South East, translating to more opportunities for diversifying your portfolio.
3. Effects on the mortgage market
A surge in housing construction could influence mortgage availability and interest rates, especially for buy-to-let and first-time buyers. Increased housing supply may drive down prices, potentially reducing deposit requirements for new buyers.
Expanding affordable housing could temper demand for rental properties, prompting landlords to reassess their portfolios.
4. Opportunities for expats
Expats looking to invest in UK real estate could benefit in a big way from this housing initiative. For one, Increased housing stock might create opportunities for expats to enter the market without competing in high-demand urban centers. Expats investing in prior government-led housing schemes have found success in leveraging favorable currency exchange rates alongside market incentives.
5. Long-term implications for property investments
By addressing housing shortages, the initiative could moderate price volatility, offering a more predictable investment climate. Targeted investments in regions outside London might yield higher growth potential as urban sprawl spreads.
How we can help
At International WealthVentures, we are here to help you make sense of your investments, be they property loan notes, council bonds, or anything in between.