The number of people living in cities and other urban environments has never been higher, which means the demand for affordable, sustainable housing has never been greater. By 2050, the world’s population will have reached nine billion and an estimated 75% of the world’s inhabitants will live in cities.
This presents a great opportunity for far-sighted investors and developers. As the housing market changes, traditional housing solutions will no longer suffice, creating a concurrent need for sustainable, green technology and architecture. In the following article, we’ll highlight a few aspects of this exciting and growing market.
Globalisation has allowed both foreign investment into the UK property market and vice versa, but more often than not, the impact for the sustainable urban development market has been negligible or negative. However, as barriers to sustainable investment fall away and governments actively promote green investment, the international property market is itself beginning to turn a shade greener.
This change presents a serious opportunity for investors. Increasingly, medium-to-small-scale UK investors are entering the international market and looking to use their capital (and advantageous exchange rates) to fund innovative sustainable solutions in markets that were once closed to foreign investment.
As market liberalisation reaches South East Asia and even China (see below), UK investors are seeking to profit from both huge demand and rapid appreciation in urban markets.
This outward-facing approach is endorsed and even explicitly promoted by the British government. In 2016 for instance, the UK Trade & Investment (UKTI) body and Innovate UK launched their Connected Cities trade mission to promote investment in places like Malaysia and Singapore.
A green global network for urban living
Just as the tech start-up scene exploded into global consciousness in the late Nineties and early Noughties, the sustainable urban living market looks set to take off within the next couple of decades in the UK and Europe.
As the combined trends of international investment and green urban development continue, state actors and private interests are increasingly called upon to collaborate across national boundaries. Around the world, networks of stakeholders in the urban living market are forming in order to better connect cities and share solutions.
Organisations such as Urban Hub bring together civic bodies, investors, entrepreneurs, third sector groups, and architects to tackle the challenges cities like London, Manchester, and Birmingham face. These groups are led by a truly global vision of sharing solutions to demand in the urban market, yet they’re open to small-scale investment and growing businesses.
Owing to the incredible population densities in its major cities, China has led the way in innovative solutions to sustainable urban living. The Nanjing Towers, for example, represent the future for clean, environmentally-friendly urban living.
Due for completion in 2018, these two vertical forests are the result of a collaboration between Swiss architect Stefano Boeri and the state-owned National Investment Group. Standing at a towering 656ft and 354ft respectively, the Nanjing Towers will convert enough CO2 to generate 132 pounds of oxygen per day, combining the best in both urban design and green technology.
These are the first towers of their kind to be built in Asia and are a striking example of both the possibilities of green urban development and the increasing openness to Western design and development in China.
The sustainable future of property development
Sustainable urban properties aren’t simply good for the environment; they’re increasingly a good investment in their own right.
Within the UK domestic property market, sustainable urban projects are catching on. As of January 2014, UK property developers cited three main reasons for investing in “green” property. Firstly, sustainable properties are more attractive to potential tenants than non-sustainable ones. As the effects of our changing climate become more pronounced, more and more consumers are looking to live in environmentally-friendly homes.
Simply put, the demand is there. Secondly, green properties provide better overall returns for developers. Green housing is sustainable in both the environmental and financial sense, as properties built with an eye to being environmentally friendly are generally less susceptible to high maintenance costs and depreciation.
Decreased energy costs and reduced waste generation are attractive to both tenants and leaseholders. Finally, although green property development currently remains more costly than non-green, the UK government and housing authorities are increasingly incentivising green development through tax breaks and funding initiatives.
If this trend continues as expected, sustainable urban development will become less costly than traditional forms of urban development in the long term.
The sustainable urban living market is a source of untapped potential for investors and innovators alike. As the world’s population increases and markets liberalize, UK investors face an unprecedented opportunity to shape the way cities are built for the better.
Ethical and green business investments, as we’ve seen elsewhere, just make more sense financially in markets where consumer behaviour and demand is changing. In particular, green tech solutions present a realisable entry point into international markets for small-scale UK investors.