BRINGING DEVELOPMENTS FORWARD
PRIVATE RENTED SECTOR
Predicted population growth of 9.7 million between 2014 and 2039 indicates that demand for housing in the UK will only increase. If the divergence between median wages and median house prices persists, demand for PRS over the mid to long term would appear robust.
Recent history has seen rents enjoy above inflation growth and scale operators should be able to tap economies throughout their supply chain – efficient up-front procurement, coordinated marketing, programmed maintenance and cost-effective daily management.
In addition to the financial benefits of the PRS model, there is also an argument that new development in this sector may become less vulnerable to the economic cycle than the traditional build-to-sell model, but there is no escaping the old adage of the need to supply the right product, in the right place, at the right price.
Despite the significant need for housing in the UK, the supply of new homes is constrained by the build-to-sell delivery model. Capital Assured’s opportunity looks at the potential for larger investors, especially those backed by ‘institutional’ capital, to expand residential supply through Private Rented Sector (PRS).
The importance of the PRS sector should not be under estimated, as it currently represents one in five housing starts, and is gaining momentum. The PRS sector is a vital part of the solution and Capital Assured aims to tackle the housing crisis, by allocating over 1000 units in the next 5 years
Unlocking the potential of an emerging property sector
The PRS in the UK is worth over a £1tn, with the vast majority (98%) tied up in the hands of small individual and small corporate landlords (IPF, 2015). There is a significant lack of aggregated investment stock available for institutional investors to acquire, this opportunity gives investors the opportunity to influence the design, mix and specification in an effort to ultimately enhance investment returns
Quarter of households in UK will rent privately by end of 2021 - Almost 5.8m households expected to be in private rentals as home ownership and social renting continue to fall
Almost one in four households in Britain will be renting privately by the end of 2021 as soaring house prices and stagnant wages put home ownership out of the reach of growing numbers of people
Multi-unit blocks of purpose-built private rented housing in single ownership – has the potential to make a significant contribution towards reaching housing targets. It is especially helpful on larger sites, where there are multiple phases of development. In these circumstances it can often accelerate delivery. It also provides benefits such as creating footfall and diversity of occupiers for non-residential uses on mixed-use sites, underpinning placemaking and regeneration
Investing in UK residential property through its Privately Rented Sector (PRS) is a compelling opportunity today. The sector has a place in a balanced diversified investment portfolio, given its low historical correlation with other asset classes and the potential to deliver attractive risk-adjusted returns. PRS is backed by strong market and demographic fundamentals, a longstanding supply and demand imbalance and, more recently, broad government support to its development as a sector for institutional investors.
Capital Assured seizes the opportunity to address this by bringing together strategic partners to collaborate in this space