What Are the Worst Consequences That Population Growth in the UK Could Bring?

While census figures indicate that rapid population growth is underway in England, there is no data suggesting that more people cannot be absorbed.

For those interested in land investment, it is a matter of simple mathematics to understand that a key driver of the United Kingdom housing shortage is population growth. Census 2011 measured a robust 7 per cent growth in the total number of people living largely in England, Wales and Scotland. The new people arrive by blessed events (births) and immigration, but it is exacerbated by the good health and longevity of our seniors, who now occupy their homes a bit longer than their parents did. With grandparents and even great-grandparents remaining longer in their flats, those abodes lag in being sold to young families.

Still, underinvestment in new housing was prevalent until recently. Housing starts are up since 2013, attributable to the Government’s Help to Buy scheme that makes financing easier for buyers and which has stimulated activity in the residential land investment sector. There are many arguments for what could and should have occurred since the beginning of the 21st century in house building; but an analysis of this population growth illustrates, perhaps, how incentives to build need to be seriously considered given the hardships created by housing shortages relative to population increase.

Forum for the Future, a sustainable development non-governmental organization, looked at this situation in a report issued in 2010 titled, “Growing Pains, Population and Sustainability in the UK.” The report takes a very nuanced look at the current population growth trends and makes several concluding observations. They include that overpopulation in stable, industrialised countries such as the UK is different from that in developing nations. Instead, the study authors urge that planning should simply assume population growth, that resource use should be done with greatest available efficiencies (maximising use of green technologies and building methods, for example), and that economic policy should shift from a dependence on growth to one that is built on stabilisation instead.

Growing Pains acknowledges that climate and natural disaster refugees, which currently number around 67 million worldwide, may increase to 250 million by 2050. The UK and other countries will no doubt face pressure to absorb some of those millions whose homes and livelihoods are lost to desertification, rising sea levels and soil salinity in coastal regions. Even with the UK’s natural population growth, strong as it is, there is a need for long-term planning regarding public services, infrastructure, the natural environment, how those populations will be distributed and the adequacy of housing to meet the need.

Two years later, the Migration Observatory at the University of Oxford looked at the “Say NO to 70 Million” campaign, which yielded 100,000 signers to a Government e-petition in 2012. The current population is at or about 63.2 million, with 53 million living in England. What the Oxford study did was take an objective, analytical look at population trends and their implications.

Key findings from the Migration Observatory include the following:

• An 11 million-person increase in the UK by 2035, by migration and natural growth (the net of births and deaths), will indeed bring the population to 73.2 million. Two-thirds of that growth will likely be by migration.

• Limiting population growth does not currently have supportive data. No one can currently say if 65 million people is optimal but 70 or 75 million is not.

• Reasons for limiting population or allowing it to grow, therefore, need to be stated. Growth can have a different (probably favourable) effect on the economy than it might on the environment. Acknowledging which objectives are the drivers should then inform policy as it affects both and other factors (for example, social issues in the face of housing shortages).

What the UK Government has said since 2010 is that land planning needs to loosen up, allowing greater local autonomy (e.g., the Localism Act) that speeds up the home-building process. This has opened up more opportunities for alternative investment funds – such as UK property funds – to buy and develop property that brings about much-needed homes.

Investors who consider participating in land and property financing can consider UK population growth a clear opportunity and signal for ongoing growth for some time to come. But no investor should get involved in real estate investing without considering its implications within the broader spectrum of wealth management; an independent financial advisor’s input is generally advised.

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