Key Tips for New Housing Sector Investors in the UK

By: Lucent Group   02/23/2015
Keywords: real asset funds, strategic land partnerships,

With such pressing demand for all forms of housing, there exist many ways for individuals to invest and profit. Newbies should engage professionals to avoid pitfalls.
If hedge fund firms are investing in rent-controlled social housing, is it time for all investors to look again at residential real estate in all its many forms?

Indeed, those who put their cash in (which develop land into residential and commercial properties) find capital gains in as few as two or three years. Those are market-rate homes, generally, that target households that are quite often already on the property ladder. But firms that include England’s Cheyne Capital Management LLP, Patron Capital, a private equity firm, and Legal & General (insurance) are seeing opportunities with social properties. Characteristic of these investments is that while rents are generally set at 80 per cent of local market rents, those rental rates are pegged to inflation.

Elsewhere in the UK, individual investors who are inclined to manage the details of being a landlord find that long-term capital gains and income are still in the offing with to-let properties.

Investors with different objectives, shorter-term capital gains, join with open-ended funds such as . These follow a process that includes several benchmarks (unlike with something such as a real estate investment trust, or REITs, which are traded on the exchanges like non-real estate equities):

  • Identify smart geography – These funds are managed by experienced land-conversion specialists who first find where demand for housing is greatest. If an employer requires its workforce to travel unwieldy distances to get to work, that may be the general area in which to locate a development.
  • Understand the predisposition of local planning authorities – Very often the land is zoned for other uses (agriculture, for example). While some degree of resistance to development is virtually inevitable, a smart business case can be made for how new homes and populations can add to and revitalise a community. With LPA approval, the value of the land alone escalates considerably.

  • Proceed with infrastructure construction – The initial investors will fund development of roads and utilities and related survey work.

  • Understand the likelihood of a Community Infrastructure Levy (CIL) – Some local authorities exercise their option to impose this charge, which is intended to offset new burdens on municipal infrastructure and services. This is more typically discussed in earlier stages of development and planning authority review.

  • Determine if selling to homebuilders is optimal – While development overall takes raw land to the construction and sale of homes, the function often splits once the infrastructure is in place. The original investors can then see their capital gains, while homebuilders pick up the job and earn their profits by building homes that will succeed in the marketplace.

By and large, first-time investors in any real estate scheme will benefit from working with trusted professionals. Almost any private investor should speak with an independent financial advisor to ensure a balance of risk and reward in their portfolio.

Keywords: real asset funds, strategic land partnerships,

Other news and updates from Lucent Group

02/22/2016

Has Localism Failed? Osborne Gets Tough on Local Planning Authorities

The post-election proposals from the Conservative Government seem to buck the trend of the 2011 Localism Act. Local councils need


02/19/2016

Does the UK Tax Regime Distort the Housing Market?

Part of how cities and towns accept new housing is through improvements in nearby infrastructure. But how that is assessed


02/19/2016

Detached Home Building is Up in the UK: What are the Implications?

Detached homes are in high demand in Britain by “second stepper” buyers upgrading from their first homes. One step up


02/19/2016

CBI on the UK Housing Shortage: It’s Bad for Business

The million-plus homes deficit in Britain is treated like a social issue. It is that but so much more; leading


02/19/2016

Building Upward: How the British Feel About High Rise Living

The squeeze is on as the British population continues to increase. London is in a tall building boom, but not


02/19/2016

Are Newly-Built Homes in the UK More Sustainable?

Indeed they are. But whether new builds or retrofits, increasing the energy efficiency of homes is beneficial to the UK


11/30/2015

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


11/30/2015

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


11/30/2015

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


11/19/2015

Lucent Group Announces Planning Award Nominations for Lincolnshire Lakes Development in North Lincol

Lucent Group, a land site assembly specialist, has been shortlisted for two prestigious Planning Awards for their Lincolnshire Lakes development


10/27/2015

Lucent Group Secures Planning Approval for Hundreds of New Homes in Workington, Allerdale

Plans for one of the largest housing developments to be built in Workington in recent years have been approved by


10/27/2015

Could the Empty Homes in England Fix the Housing Shortage?

There are hundreds of thousands of houses and flats that sit empty in the UK for various reasons. Some might


09/25/2015

What UK Land Investors Should Know About Strategic Land Investments

Strategic land stands alone among land investments. It answers the pressing need for home building by increasing land designated for


09/25/2015

What are Joint Venture Partnerships?

The collaboration of talent and capital is, arguably, what makes the world go around. JVPs in strategic land development are


09/25/2015

The Various Roles in UK Joint Venture Land Investments

The advantages of investing through a joint venture partnership include reducing risk and acquiring the knowledge and skills of other