What Does the Crossrail Commuter Project Tell Us About Strategic Land Investing?

By: Lucent Group   04/21/2015
Keywords: Real Esate Listings, Property Investment, Land Investment

Land values along the Reading-to-Sheffield line in Essex have increased by 96 per cent, demonstrating the pent-up need for housing in strategic UK locations.

Crossrail, the new, 75-mile east-west commuter train line set to become operational in 2018, is highly anticipated by the people who will see their travel times reduced and made more comfortable. As land values along the new line and nearest its stations increase, so too does an awareness of how UK land and home values can rapidly increase with easier workplace access.

The line means that an additional 1.5 million people will be within a 45-minute commute of London’s key business districts. But expanding commuter rapid transport is about more than helping people travel faster. Where new commuter rails go, new homes are sure to follow. This is due in no small part to the 96 per cent valuation increase to homes in these areas over the last ten years– a rapid increase that developers and investors in UK strategic land recognise as significant (note: this statistic is from eMoov, the online real estate firm, based on comparisons to when the project was first actively discussed a decade ago).

Individuals and institutional investors understand the economics fairly well. Where there is work, there needs to be sufficient worker housing. In the UK, there is a distinct shortage of homes in general but not since the post-War period has there been as stark a shortfall in the availability of housing.

Growth in employment and the availability of housing is almost never in perfect sync. Consider these two disparate factors as measured in 2012 through 2013 from the Government’s Office for National Statistics:

Job growth post-recession is robust in some places - The top ten highest job growth areas are naturally concentrated in the London metro (Westminster, Islington, Tower Hamlets, Hackney, Camden and Lambeth), but also include Manchester, Birmingham, Leeds and Milton Keynes. The occupations that are growing fastest are in the professions, science and technical fields, followed by accommodation and food services and information/communications jobs.

Housing is in abundance in the wrong places - There are too few homes in some places and many under-occupied houses in others. Where there aren’t enough homes, larger families (including multiple generations of families) occupy smaller homes and flats; there are 1.1 million households categorised as overcrowded, most in privately rented or social housing, but some in owner-occupied homes as well. And yet, there are an estimated 16.1 million households with at least one spare bedroom. These under-occupied homes are largely in the Midlands or in the north of England (Rutland, South Northamptonshire, Rushcliffe and elsewhere), while local authorities report the areas in and around London as the most over-occupied. These include Newham, Brent, Tower Hamlets, Haringey and Waltham Forest.

To the investors, such as those involved in joint venture partnerships, that seek planning authority changes to land use (converting unoccupied space to that which is zoned to residential and commercial development), these asymmetries spell opportunity. New transport lines and growing businesses always spell a shift in where people work and live. The response by investors, developers and homebuilders is to provide the kind of housing that are needed in dynamic economies.

Investors need to look beyond simply where development might provide a high yield in asset growth. They also should consider where real estate might fit within their personal wealth-development agenda. Speak with a personal financial advisor to discuss factors specific to and external of the investment.

Keywords: Land Investment, Property Investment, Real Esate Listings

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