A combination of a national housing shortage; radical changes in legislation and fewer mortgage products for buy-to-let landlords; and house building for home ownership being behind government targets has promoted the Private Rented Sector (PRS) to the fore. Although it has been around for more than a decade, with billions in institutional money committed to build-to-rent projects in 2016, PRS is set to become one of the go-to institutional asset classes of 2017.
To date, the government’s Homes & Communities Agency has put forward £1bn in debt and equity funding to encourage private sector investment and the Department for Communities & Local Government has similarly funded £10bn in guarantee schemes. A number of large UK funds are committed with the likes of Legal & General investing £600m to a project last year in partnership with a Dutch pension fund manager. Foreign interest doesn’t stop there with a number of larger European and US pension funds, direct investors and sovereign wealth funds all attracted to the sector.
Due to the enormous interest in the sector, The Consultancy Group’s Antonia Chambers recently hosted a business breakfast with a guest speaker who is an expert in the PRS world. Andrew Screen, Senior Director Residential Investment and Advisory CBRE presented to a number of senior financial professionals on PRS Funding Evolution, which included:
- An overview of the PRS/Build-to-Rent market
- The sources of funding, including debt and equity and details of funding structures
- Public sector PRS, PWLB and income strip funding
- What makes an ideal PRS deal
- The risks and rewards of PRS
With the government being lobbied to provide financial incentives to investors to invest in homes for rent rather than sale, as well as make publicly owned brownfield sites available at a discount, it is thought that PRS is crucial to the UK’s future housing supply and may well change our nation’s deep-seated home-ownership mentality. The list of institutional investors such as UK pension funds and insurance companies involved at either investor, developer or manager level is impressive and the PRS market is extremely active due to the attractive yields offered.
Our informative business breakfast was a great success, thanks to the excellent speaker and the engagement of the attendees from the real estate sector in and around London. For more details, please see the short film we made of the event here or contact Antonia Chambers on Antonia@consultancygroup.com