PRS proving a key opportunity for institutional grade investment
According to Knight Frank’s recent study, The Multihousing Report, the number of households living in the private rented sector is set to rise to 24% by 2021.
The research, published earlier this week, indicates that institutional investment in the PRS should accelerate over the next five years to £70 billion.
A survey, of over 10,000 people living the PRS, conducted by YouGov on behalf of Knight Frank, found that 68% of UK renters believe they will still be living in rented accommodation in the next three years.
Knight Frank’s analysis of the key drivers in the PRS, coupled with the outlook for household growth, has forecast that 5.79million households will be in the PRS by 2021.
The largest proportion of households living in the PRS is made up of young professionals, aged 25-34, who are taking advantage of the increasing flexibility of tenure which allows them to move between locations without enduring the costs associated with buying or selling a property.
Increased stamp duty and the reduction of mortgage interest relief has created an opportunity for large scale operators in the rental sector, with investment in build-to rent or multihousing schemes, now worth an estimated £25 billion.
Knight Frank’s survey also spoke to 26 major investors and operators in the UK’s Multihousing sector, to try and determine how the market is set to develop. At present, 65% of investment is in London, compared to 35% in the rest of the UK. 4% of residential properties under construction in England and Wales are Multihousing compared to almost 15% in London.
James Mannix, Head of Residential Capital Markets at Knight Frank commented, “The strength of the UK PRS sector has grown demonstrably in recent years. As consumer demand for affordable, flexible accommodation continues to rise, PRS is firmly establishing itself as a key opportunity for institutional grade investment, due to its long-term potential.
In order to enhance Build-to-Rent specifically, the main hurdles of planning policy and land supply must be addressed. With both issues being recognised in the recent Housing White Paper, we hope to see the Government encourage more Build-to-Rent and help to better identify developable land.”
Tim Hyatt, Head of Residential Lettings at Knight Frank also commented, “The flexibility that renting offers has reinforced its popularity as both a sensible and accepted solution for young couples without children and those living on their own but also highlights an expected rise in older households over the next five years. The number of people renting out of choice rather than due to affordability of ownership constraints is an interesting indicator of how the PRS market will continue to thrive in terms of tenant demand.”
Full article available at PropertyReporter: http://www.propertyreporter.co.uk/landlords/prs-forec4st-for-significant-growth.html