Why FDI cannot ignore housing
While many factors influence a location’s ability to attract investment, one often overlooked aspect is the availability – and affordability – of housing, says Courtney Fingar.
Global shortages of adequate housing represent a significant challenge that affects millions of people worldwide. While housing shortages can vary in scale and severity from one region to another, the problem is prevalent and has far-reaching social, economic and environmental consequences.
Inflation, alongside undersupply of housing stock, population increases or displacements, stagnant wages and construction bottlenecks, have created housing crises in both advanced and developing economies.
Housing is high on political leaders’ agendas as it is an emotive and essential issue. But it also features in corporate site selection decisions, although this link is not always clear to investment promoters. Housing goes beyond providing shelter: it is a critical factor in creating the kind of attractive and prosperous environment that foreign investors seek. A well-developed housing sector not only enhances the quality of life for residents, it also sends a clear message to the global business community: this is a place where investment thrives, as do its inhabitants.
As described by mayor Jeroen Dijsselbloem, in the city of Eindhoven, companies banded together to create a housing fund to address shortages in the city. This highlights the importance of the issue to the corporate community. In short, to establish a location as a home for business, it first has to ensure it has homes for people. There are a number of reasons why adequate supply of suitable housing matters to foreign direct investment (FDI):
1. Quality of life for employees
For multinational corporations considering foreign expansion, providing a high quality of life for their employees is crucial. Adequate and comfortable housing options are integral to ensuring that expatriate workers and their families feel safe and content in their new environment. But this applies equally to local employees. An attractive housing market helps companies recruit and retain top talent, which, in turn, makes a location more appealing for FDI.
2. Infrastructure and urban development
Foreign investors seek regions with well-developed infrastructure and urban amenities. A robust housing sector goes hand-in-hand with these priorities. Investments in housing often spur infrastructure development, such as transportation networks, utilities and public services. The availability of modern, reliable housing can influence investors’ perception of a country, region or city’s commitment to creating a conducive business environment.
3. Economic stability and market growth
A thriving housing market reflects economic stability and consumer confidence. For FDI, this signals potential market growth. Stable property markets encourage foreign businesses to invest, as they anticipate an increasing customer base, higher consumption rates and long-term profitability.
4. Ancillary services and industries
The housing sector has a far-reaching impact on ancillary industries, such as construction, interior design, real estate agencies, and property management. These sectors provide additional investment opportunities and job creation, enhancing the overall appeal of a destination to foreign investors.
5. Social integration and cultural exchange
A diverse and vibrant housing market is essential to fostering social integration and cultural exchange. Foreign investors value countries that embrace multiculturalism and inclusivity. Housing options that cater to a diverse population help build bridges between expatriates and local communities, making foreign investment more welcome and less isolated.
6. Long-term investment stability
Investing in housing often represents a long-term commitment, as property values tend to appreciate over time. For FDI, this long-term stability is an attractive feature. It signifies that the host country is dedicated to creating an environment where investments can grow and mature.
For all these reasons, the importance of housing in attracting inward investment cannot be understated. As locations continue to compete for FDI, nurturing a robust housing sector should be seen as essential to an area’s prosperity and economic growth.
Courtney Fingar is the founding partner of Fingar Direct Investment and a contributing editor to Real Asset INSIGHT.
