By Nikki De Guzman:
The UK residential rental market is poised to receive huge investment capital, with investors bringing in around £7 billion (S$13 billion), according to media reports.
The property investment arm of London-based insurer Prudential invested £105.4 million (S$199.5 million) in rental property by acquiring over 500 residential units to let in London as well as in the south of England, reported iNVEZZ.
More investors of the similar calibre are expected to follow suit. Property Wire reported that around 30 institutions including American private equity firms and British pension funds plan to buy or develop blocks of homes to let. Among them are British insurers Legal & General, Aviva and US Oaktree Capital.
In explaining the influx of investors into the sector, property consultancy firm CBRE said these institutions are drawn by the high return on property, which exceeded four percent compared to less than two percent for European government bonds.
The appeal of the residential rental sector is further buoyed by the present conditions that force more people to rent rather than buy. Each year, around 230,000 homes are needed in the UK, but only arounf 90,000 were being built. The huge deposits needed for first-time home buyers’ mortgages also pose another problem hence people are forced to rent indefinitely, making investment into residential rental sector potentially profitable in the long term.
Nikki De Guzman, Junior Reporter at PropertyGuru, wrote this story. To contact her about this or other stories email nikki@propertyguru.com.sg
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