At the time of writing, during this year's Democratic Convention, Democratic nominee and U.S. Vice President Kamala Harris was unveiling her plans for 3 million further homes to be added to the US housing market by 2029. This policy has a strange familiarity to it, on the one hand outlining the global nature of the housing shortfall challenge and, on the other, perhaps compounding the size of the challenge on our domestic front. Given our 1.5 million target, and given the United States is 40 times the size of the UK with a significantly larger domestic construction industry, the US numbers seem relatively modest, or realistic, depending on your view towards our own policy.
One story that caught our eye was an interesting news item on CNBC America outlining how the University of Maine is working to ease the U.S. housing crisis with a 3D printer: "The world’s largest thermoplastic 3D printer could change the industry by using natural materials to print houses every 48 hours". This device would allow cabin-like constructions to be wood-printed and pieced together quickly and efficiently in the fashion of giant Lego pieces in a sustainable and eco-friendly way. Now, at this juncture, we would like to point out, and to excuse the pun, that this is the absolute cutting-edge of housing delivery and will likely not become the norm worldwide overnight. Still, just as the fintech proportion of the lending industry has adapted over the years to meet the needs of development clients, time will eventually evolve housing construction to meet demand, the demands of the market, and the ecological demands of an ever-changing world.
One of the common misconceptions we notice when working so closely with property developer clients is that SME developers are grounded in brick and brick due to margin constraints, but that is rarely the case. If anything, the opposite may be true; with comparably boutique homebuilders, there is no conveyor belt or typical build; you find an array of different styles and designs; it's the passion projects and the outliers, the people who are designing the homes of the future, who have the most arduous time with the financial systems of the past, these are the clients who glean the most value from fintech partnerships.
Back firmly on the domestic front, UK real estate investment is showing strong signs of recovery, according to the global property advisor JLL. Their report stated that "land and development investment increased 12% year-on-year to £22.6 billion." Perhaps the most interesting part of the report regarding global capital flow is that it also indicated that international investors accounted for 52% of the incoming wealth in H1 of 2024. This is a reassurance given the economic path we have been on over the last 12 months.
It's important to remember there is a nuance when it comes to international investment; the go-to of recent years is to always fall back on binary arguments; things are either right or wrong, but in reality, complex situations require complex solutions. On the one hand, redistributing domestic housing assets to offshore investors at a pace way beyond production arguably accelerates the housing crisis. On the other hand, we need and appreciate a considerable amount of foreign investment in our markets and infrastructure. Nuance is required, so a sensible amount of controlled investment is always needed.
What's positive to see is international wealth managers working collaboratively with our domestic financial services infrastructure, and we have seen that recently with Blackstone selling 3,000 homes worth £405m to the UK’s biggest pension fund, Academia. This is US private equity betting on the UK housing market turning around a lot quicker than anticipated, but perhaps more importantly, this is market making; they are essentially buying blocks of housing to order from the big six and selling them to UK institutional clients, the housing is then deployed as shared ownership, and the yield comes back to the institutional buyer to help service in this instance, pensions. The reason to highlight that is that it highlights the complexity of the debate; the common misconception is that international money is asset stripping or becoming the landlords of Europe, but there is a way that they can profit whilst adding value to our domestic set-up, it can be a net value add for everyone.
As housing production evolves, so does the ecosystem and the technological solutions the lending industry can provide. We see ourselves as part of that evolution, and it's exciting to be on the front foot tackling these challenges with our clients and partners.
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