The government needs to encourage investment in the private rented sector (PRS) if it is to meet the housing requirements of the UK's population. This is the opinion of Sir Adrian Montague, who announced the findings of his report into how to boost the country's build-to-let sector yesterday (August 23rd). "My review shows that the rental housing sector offers potential investment opportunities of interest to institutional investors. But real momentum has been inhibited by constraints affecting the supply of stock, the treatment of rented housing schemes under the planning system and the need to create confidence among investors," he asserted.
A number of recommendations were made in the report, which are designed to help the government encourage more private institutional investors to get involved in build-to-let schemes, and to make such projects more favourable to developers. These include local councils reviewing stalled housing initiatives to see if rented property could be a viable part of the mix, as well as using planning regulations "flexibly" to boost residential real estate construction. Sir Adrian also suggested the central government should offer redundant public sector land and buildings to developers who are prepared to build a scheme that includes rented properties.
Charlie Cunningham, chief executive officer of real estate developer FreshStart Living, backed the proposals put forward by the Montague Review. He is confident that, provided the projects are managed effectively, they will deliver "strong, safe returns for investors as well as affordable rents for tenants". Mr Cunningham added it is time the construction of lower-cost homes is prioritised, rather than continuing to support developments that provide "high-end, overdesigned and overpriced properties".
Housing minister Grant Shapps said the government is "determined" to raise the profile of the PRS and to encourage more developers and investors to get involved in this sector of the real estate market. Investors who are yet to be convinced of the merits of putting money into the PRS may be swayed by findings published earlier this month by PwC. The firm revealed that, between now and 2025, investment in residential property for rent is expected to deliver a real return of three per cent per annum. This is significantly higher than the less risky index-linked gilts, which are predicted to provide 0.5 per cent annually, and is not much lower than the total returns estimated for equities (5.5 per cent), with this asset class carrying a much greater risk to investors than residential real estate.
- Tuesday 28 August 2012