Adjustment

In this week's blog, we have a look at a recent article in the Financial Times where the UK housing minister, Matthew Pennycook, stated that London’s high land prices “need a market adjustment.” The comment, understandably, has raised serious eyebrows across the property sector. Is this teeing up expectations to "Beware the Ides of March" for asset values? For long-term investors focused on sustainable value creation, however, it reads very differently. For Invest&Fund, this moment represents not a threat to the UK property market, but an unavoidable and necessary reset, one that could unlock more predictable returns, stronger partnerships, and a healthier investment environment over the medium to long term.

London’s residential property market has long been defined by scarcity-driven price appreciation. While this dynamic has always rewarded early-bird capital, it has also introduced volatility, political risk, and diminishing marginal returns for new investors. Escalating land values inflated development costs, constrained supply, and concentrated value in land rather than productive assets. Pennycook’s framing of a “market adjustment” signals a shift away from this age-old model. Crucially, the objective is not a collapse in asset values but a rebalancing in which land prices better reflect deliverability, planning reality, and long-term housing need. We see this transition is inherently constructive, because markets characterised by extreme price growth tend to discourage patient capital and favour short-term speculation. Markets that stabilise around fundamentals, by contrast, reward long-term structures, such as the success of our domestic development market. Or, to frame our point slightly differently, a flatter price environment does not eliminate returns; it simply shifts where returns come from.

One of the most significant takeaways from the Minister's remarks is the government’s recognition that the current housebuilding model is structurally constrained, which is something that we have historically spoken out on. The UK cannot meet housing demand relying solely on a small number of volume builders, optimising margins through a conveyor belt system of land banking, and the proposed direction, which includes greater public-private collaboration, diversified delivery models, and increased participation from institutional investors, aligns closely with Invest&Fund’s positioning & model.

High land prices have been one of the biggest barriers to new capital entering London. In many cases, land valuations assumed planning outcomes and sales prices that were increasingly unrealistic in a higher-rate, affordability-constrained world. A gradual market adjustment helps correct this mismatch, and for Invest&Fund, more realistic land pricing improves development viability, risk-adjusted returns, and downside protection. It also opens opportunities to acquire or partner on sites that were previously mispriced or stalled. Projects that did not work under aggressive price assumptions may become attractive when land costs reset and policy alignment improves. This is especially relevant for investors focused on long-term deployment rather than peak-cycle entry, and on the recycling of capital through the property market by backing its future development.

One implicit message in Pennycook’s comments is that the era of relying solely on perpetual house price inflation is ending, and I think anyone with a sense of the wider market is aware of that, the “easy cash” so to speak has been made, but smart income focused investors perhaps see this commentary as validation, professionally managed platforms such as ours for instance benefit from a market consisting of a more stable pricing environment, income visibility improves, enhancing portfolio resilience and making assets more attractive to long-term allocators, the liquidity needed to fuel the development cycle.

So, abandon all hope, ye who enter here? No, not really, the sobering commentary from the Minister doesn’t suggest abandoning London as an investment destination. Instead, they imply a more rational London market, one where returns are earned through execution, scale, and strategy rather than solely through scarcity. London is our home; it’s the home of this business, so we have an undeniable positive bias, but we are always honest in our assessments, and we believe that market adjustments are often framed as threats because they challenge old assumptions. In reality, they create space for better capital to outperform.

Taken together, the Minister's comments support a core Invest&Fund thesis: long-term, institutionally aligned capital is best positioned for the next phase of the UK housing market, whether this be improved entry prices for clients as land values flatten, greater alignment for government delivery goals, or just a reduced reliance on market speculators.

Rather than resisting adjustment, Invest&Fund can benefit from embracing it by continuing to deploy capital where pricing, policy, and long-term demand converge.

Invest & Fund has returned over £330 million of capital and interest to lenders with zero losses, showing the rigour that governs our business. To take maximum advantage of this robust and exciting asset class, please visit www.investandfund.com

Don't invest unless you're prepared to lose money. This is a high-risk investment. You may not be able to access your money quickly and are unlikely to be protected if something goes wrong. Take 2 minutes to learn more.