Property Development Investments
As you may be aware, the Clifford Morton Investments team spend much of our time researching investment sectors and products. When doing so, we are looking for attractive options which offer sustainable returns and multiple levels of capital security. This detailed analysis and research enables us to make investment introductions that will benefit our clients for years to come. With that in mind, this short opinion piece is designed to put Property Investments firmly on the radar of those considering their investment options.
Investing in Property – the background
We are talking about property investments today against the backdrop of a real surge in interest. So let’s start with some brief context.
The relative security of property has meant that private individuals have favoured it as an investment for decades. Historically, the popular method of investment was through Buy-to-Let or other similar arrangements.
However, housing has become increasingly politicised and the resultant taxation changes have squeezed the returns for private landlords. This in turn has left private landlords wondering how best to continue to enjoy the security of property based investing while earning a decent return on their capital.
How does Investing in Property Development work?
In response to this situation, investors are now privately backing property development firms. This typically means investing into a development firm through a Fixed Loan Note. In this arrangement, the ongoing development provides security to the investor.
When a development firm generates funds in this manner they are used to pay for the costs of a specific construction. Recent examples include; housing estates, shopping centres, retail outlets and leisure centres. When the development reaches an agreed point of construction, the developer repays the original capital plus interest to the investor.
Why now is the time for Property Development Investments
Over the past few months the Clifford Morton investments team have observed a number of factors that strongly indicate the property investment market is set for significant growth. We’ve summarised our analysis below;
- Like several Prime Ministers before him, Boris Johnson has restated the urgent need for building of local, affordable housing. Let’s not forget that the government carries target of a whopping 300k new homes per year. The next General Election – slated for 2024 – may still seem some way off. However, in the world of property development this does not leave a lot of time to get projects of the required scale up and running. Therefore we expect the pressure on Government, both from within and from across the benches, to ramp up significantly on this core topic.
- The government is currently falling well short of this target. As a response, legislation is being developed which will see the biggest shakeup to planning permissions for over 70 years – you can read more about this here. In short, the government is planning to make it much easier for developers to build new homes.
- Investors have always considered property a relatively safe investment. However, Buy-to-Let has now seen a significant proportion of the financial rewards squeezed out. This has led to a rise in the number of alternative Property Investment products.
- The Bank of England recently announced that there is over £215bn idling in UK current accounts. What’s somewhat surprising is that these funds are generating little or no interest. This means that investors and homeowners have a serious weight of cash to unleash.
What level of return do property investments provide?
The investment team have recently been introducing clients to a number of property investment opportunities. The returns available on these products are typically double digits pa with annual or compounded interest.
Please get in touch if you would like to know more about investing in property development. We’ll be glad to answer any questions you may have and, if suitable, share some investment ideas.