How investing into property bonds is an impact-driven investment

By Jo Bentham16th July 2021

One of UK investors’ favoured assets, investing into property has clear potential to deliver lucrative returns, with continuous high demand and a history of strong capital growth.

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The residential property market in particular has proven itself to be an important addition to an experienced investor’s portfolio in recent months, as the housing market boomed following the lifting of Coronavirus-related restrictions. 

But in an increasingly socially and environmentally conscious world, with ESG investing on the rise and considered to be a core investment trend in 2021, making a positive impact when investing is becoming more and more important to a significant number of investors. 

And though the popular asset of property is accessible in a variety of ways, it’s when looking at property bonds that the social, economic and environmental benefits of investing into the asset become particularly apparent.

 

Supporting jobs and the economic recovery

When investing into property bonds, experienced investors are providing small and medium-housebuilders with the alternative finance required to build much-needed new homes – a hugely positive impact in itself. 

But by doing so, investors are also supporting thousands of local jobs, with house building maintaining almost 750,000 jobs in the UK. Crucially, this is not just jobs in the immediate construction industry, but the wider supply chain - estate agents, interior designers, architects and many more. 

Creating jobs is clearly always crucial, but in the aftermath of the Coronavirus pandemic, this has been exacerbated. 

In July 2020, Rishi Sunak, Chancellor of the Exchequer, highlighted the importance of the housing market in helping the UK’s economic bounce-back in the wake of COVID-19. Sunak reiterated that housing development is “one of the most important sectors for job creation”, with the construction sector adding £31 billion per year to the UK economy.

It’s easy to see why. After almost 18 months of economic downturns where most sectors faced losses, the continuing growth of the housing market is imperative – to ensure the all-important job creations and economic contributions are maintained. 

 

Helping to build much-needed housing amidst a chronic shortage

The positive economic impacts are not the only ones created when investing into property bonds and in turn supporting small and medium-sized housebuilders. 

The UK is suffering from a much-publicised, ongoing housing crisis – and has been for several decades. There are not enough homes to cater for the backlog of existing need for suitable, affordable housing – and that is without considering the recent staggering surge in demand. 

And it’s widely known among experts and the Government alike that in order to tackle this crisis, SME housebuilders must be able to once again establish themselves in a market which they dwindled from in the aftermath of the 2008/09 financial crisis. 

Once responsible for delivering circa 40% of new homes, that number has dropped closer to 12% in recent years, with the Government stating in The Planning White Paper that there is a need for regional housebuilders who are “looking to build a diverse range of types and tenure of housing, and those using innovative modern methods of construction”.

When investing into property bonds, experienced investors are helping to provide these SME housebuilders with the capital needed to build the right homes in the right places, at the right time. 

Furthermore,regional housebuilders often deliver mixed-tenure developments boasting homes for sale, to rent and initiatives such as rent-to-buy and shared ownership. Such approach can ensure developments cater to a wide variety of buyers, aiding in potentially making housing more affordable and accessible to more people – from growing families looking to move to their next home, through to young professionals looking to get on the property ladder for the first time.

 

Aiding in regenerating communities and making environmental impacts

In addition to supporting the delivery of more homes, investing into property via property bonds can help to ensure the homes are built in a manner that benefits both the environment and the surrounding communities. 

To help protect the UK’s renowned and beautiful countryside, building new homes on brownfield land – land that has previously been developed but is not in current use – is imperative. But often this land does not offer the size and scope that most national housebuilders look for. 

Regional housebuilders on the other hand typically deliver developments that are smaller and more bespoke, meaning they can make greater use of this land, turning it from an unused and often run-down space into an attractive, welcoming housing development which in turn regenerates communities.

 

Investing for impact with property bonds

Supporting local jobs and contributing to the UK’s post-Coronavrius economic bounce-back, helping SME housebuilders tackle the ongoing housing crisis, and aiding in the delivery of homes in a manner that is both environmentally friendly and has the potential to regenerate communities – the core, impact-driven benefits of investing in property bonds are clear. 

Paired with the potential to generate returns of between 4% and 8% and opportunities to invest in a tax-efficient manner through vehicles such as the Innovative Finance ISA (IFISA), it’s unsurprising that the popularity of property bonds as a method of investment into property is on the rise.