With Brexit-shaped storm clouds continuing to hang menacingly over the UK, putting your money into property may seem foolish to some.
Paul Stockwell (pictured), chief commercial officer of Gatehouse Bank.
With Brexit-shaped storm clouds continuing to hang menacingly over the UK, putting your money into property may seem foolish to some.
With warnings about asset bubbles stirring, house prices declining for over a year in London and well-watched house price indices giving wildly different readings, it’s at times like this that some choose to sit on the sidelines.
However, I believe, the smart money over the long-term is continuing to build. And if that surprises you, then we should look at the history of the UK housing market.
So far this century, the performance of the FTSE-All Share has increased 22.7%, while the average property price in England has ballooned by 226%. It’s an astonishing statistic and a withering demonstration of the enduring stamina of UK property investments over time.
Underpinning this is the famously stubborn housing crisis, exacerbated by the breakdown of the relationship between supply and demand. To truly understand it, you have to go back even further than the turn of the century — 60 years in fact.
The private sector built more homes in the UK in 1959 than it did in 2017 — 141,510 vs 134,220.
That’s incredible when you consider the population growth the UK has experienced in that time. And it’s not hard to find even more evidence that long-term investment in UK residential property is ‘as safe as houses’.
Indeed, research commissioned by the National Housing Federation has shown that there is a shortfall of four million homes in England. Its report recommended that 340,000 new homes should be built a year in order to tackle the demand.
However, in 2017/18, housing stock in England increased by just 2%, or 220,000 homes, according to government data. This is well below what is needed and the housing shortage deepens each year.
Even 2013’s Help to Buy scheme has failed to help spur building targets adequately, despite loaning buyers of new homes over £10bn of taxpayer cash.
A Commons briefing paper in December last year collected all the studies together so we know that, across the spectrum, the various experts think we need to create between 240,000 and 340,000 homes a year.
Meanwhile, Oxford Economics has predicted that increasing housebuilding to 310,000 per year would only result in a 5% reduction to forecasted house prices.
The closest we’ve got this century in England was 223,534 net additional homes in 2007/8 before the global economic crisis and it almost reached that level again last year — so we have lost a decade.
Now England is sitting on a backlog of four million households and the depth of the housing crisis has begun to have other knock on effects.
Over the past decade, the number of households privately renting has grown 60% — from 2.8 million in 2007 to 4.5 million in 2017. We are also seeing a growing trend of people renting out of choice.
The country’s best hope remains in building new homes, and I believe, there’s only one way to do this in a way that alleviates the problem, satisfies investors, increases supply and meets demand from ‘proactive renters’ — and that is Build to Rent.
In 2014, Gatehouse Bank launched its first Build to Rent fund. The fund we manage paid for homes to be built, then took a role in their management as they were let, generating income for investors.
We’ve established two Build to Rent funds so far, resulting in 1,700 new, quality homes in 22 developments across the North West of England and the Midlands.
Build to Rent is the most exciting and enduring investment opportunity in the UK today because Britain possesses almost inexhaustible demand for housing.
While optimism among some property commentators cools in the face of uncertainty, we are struggling to imagine how many entrants in the Build to Rent space would be too many.
