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Tesco wants to enter the UK’s insatiable housing market

A customer shops at a Tesco shop in Bishop's Stortford, southern England November 26, 2012. Eight months ago Tesco Plc chief executive Phil Clarke set out a 1 billion pound ($1.6 billion) recovery plan to arrest the group's worrying loss of market share. How well it's working may start to emerge next week. Picture taken November 26, 2012. REUTERS/Suzanne Plunkett (BRITAIN - Tags: BUSINESS FOOD) - RTR3B22H
Reuters/Suzanne Plunkett
Don’t forget to leave your rent check on Aisle 12.
By Kabir Chibber
Published Last updated This article is more than 2 years old.

Tesco, by far the biggest supermarket chain in the UK, already sells groceries, clothes, and tablets while offering banking and mobile services. Now, it is looking to turn itself into a landlord for Britain’s resurgent class of first-time home buyers.

The reason Tesco is moving into real estate development is that it’s facing competition from German retailers Aldi and Lidl, and so doesn’t need to develop more of the mammoth superstores that it is famous—and loathed—for. Instead, the company said it will build as many as 4,000 homes by 2017 using some of the huge amounts of land it owns.

“In response to changing customer shopping habits we have decided to reduce the amount of new store space we build each year, building fewer large stores,” a spokesperson said. “Where we no longer intend to develop sites, we sell them, lease them or develop them for housing.”

In its last annual report (p. 91), it said the net value of the land it owns or leases is a staggering £20.8 billion ($35.5 billion)—and this Guardian chart shows how widespread Tesco land ownership is throughout the UK.

The news comes as the number of first-time homebuyers in the UK hit its highest level in the first half of this year since 2007, as markets peaked before the financial crisis. Is this return due to the strong economy? Nope. It’s mainly due to the government’s Help to Buy scheme, where the state offers a loan to buyers of newly-built property or guarantees 15% of a mortgage for houses worth less than $600,000.

If Tesco can’t make money by selling food on the land it owns, it intends to make some by flogging it to the great British public—with the taxpayer’s helpful financing, of course. The new houses will mainly be built in the wealthy south-east of England, around London, where house prices have been bubbling over some time now.

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