From an investor's perspective, the ROI in housing might be
greater than that achieved from road and rail projects. But infrastructure is
fundamental to development and deserves holistic thinking.
The relationship between housing and public infrastructure
has always been strong, even if indirect. One need look no further than the
London Cross rail project, which is adding 75 miles of commuter trains to the
city's system and where, to no one's surprise, housing values near new system
stations are rising rapidly.
But to an investor, if a choice must be made between
financing various kinds of infra (transport, utilities, broadband, flood
mitigation, and more) and residential development, it can be challenging to
determine which might yield the greatest return on investment. Yet because the
two are interdependent it is entirely logical for investors to consider them
within the same investment decision-making process.
This discussion is ramped up by the pressing need for
additional housing in the UK. This is strongly incorporated into the National
Infrastructure Plan 2014 by HM Treasury, the Government's economic and finance
ministry. The report cites several infra projects where housing and public
amenities could be inextricably linked if the Plan is fully implemented, as
well as where previous public projects have succeeded:
• Suburban network rail connected: A Government loan
(contingent on a principal heads of terms agreement) of 55 million to extend
the London Over ground to Barking Riverside, predicted to help deliver 11,000
homes.
• Land remediation and infrastructure: In Ebbs fleet, a 100
million infrastructure fund will enable up to 15,000 homes to be built in a new
garden city.
• Rail upgrades: Already, a major upgrade since 2010 of
King's Cross Station rail unlocked 2,000 new homes.
• Road transport and public spaces: A spend of 23 million
for a road crossing between Swindon and Wichelstowe (on the M4) opened a new
site for thousands of homes. Meanwhile, construction begins in 2015 to provide
transport links and public spaces that will transform Battersea, Nine Elms and
Vauxhall, with the potential for creating 16,000 new homes.
Very often, both housing and major infrastructure programmes
are a mix of private and public funding. But housing exists in a different
sphere, providing returns to investors in relatively short order and the
majority of homes are built by the private sector. True, financiers, including
those who work in real asset portfolio investing, may need to go through
planning authority processes.
Investors working in infrastructure through municipal bonds
are not as common in the UK as they are in the United States and other European
countries. The majority of local government borrowing is historically through
central Government, but since 2014 a consortium of local councils has begun to
fund the Local Capital Finance Ltd. Agency, which takes bonds to investors. The
Chartered
Institution of Highways & Transportation called for a
greater sense of interdependency in public and private projects in a 2012
report (Action Plan for Change; Infrastructure Funding & Delivery), stating
"A hybrid public and private sector infrastructure fund should be created
for a discrete geographical area which, whilst not generating mainstream
capital market investment returns, would deliver infrastructure that benefits
local land values and local businesses." The problem, argue some, is that
infrastructure lacks data and benchmarking, lending an opacity to municipal
investments that makes councils and investors skittish; the broadest benefits
of roads, rails and flood abatement are at best proven over decades, not
quarters or fiscal years.
Investors need to weigh many factors relative to development
in the UK. While the overarching economic factors of population growth and
housing
finance ltd inventory suggests strong opportunities, individuals are
wise to engage an independent financial advisor to examine where development
projects fit wealth building objectives.
These are not simple "apples to apples"
comparisons, and the potential for growth in some types of real assets funds is
not always easy to ascertain. It is largely a transaction amongst owners of UK
land, site assembly professionals, builders of utilities and structures, as
well as the private individuals who buy the homes.
Source: http://EzineArticles.com/8959685
