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Opinion: For build to rent, this year could be make or break

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Opinion: For build to rent, this year could be make or break


Published by Anonymous for in Housing

Opinion: For build to rent, this year could be make or break Opinion: For build to rent, this year could be make or break

Robert Flint, private renter and solicitor at Winckworth Sherwood, examines the opportunies for, and threats to, growth in the UK private rental market.

Overseas investors are braving the awful UK weather, putting on their wellies and getting ready to invest in the UK housing market.

Notably, some investors are particularly keen on the build to rent market. The attraction is the possibility of securing a reliable, asset backed rental income stream. And they are not the only ones aware of the potential of the market. The government, through UK Trade & Investments (UKTI – a mini department within Vince Cable’s BIS empire), is gaining valuable experience in this area, aware that some investors need a little hand-holding before parting with their money in a country famous for home ownership.

UKTI has had some notable successes, including international investment secured for the Battersea Power Station project, Nine Elms and Royal Albert Dock, and Manchester City Airport. My employer, Winckworth Sherwood, has worked on some of these projects and we have seen first-hand the importance of overseas investment in making them happen.

Within the UKTI umbrella, the Regeneration Investment Organisation (RIO) last month helped broker the £700 million deal between Sigma Capital Group and Kuwaiti-backed Gatehouse Bank to invest in 6,600 build to rent homes in Liverpool and Salford. The 11% growth of inward investment in the UK last year (on the back of two years of even higher growth rates), suggests there is more where that came from.

Expectations of Fed “tapering” and lower growth rates in developing markets are already causing capital to return to the relative safety of western markets. After the drought of the last few years, there should be more money to go around and, with 165 regeneration projects in the pipeline, RIO is alive to the opportunity.

Some consider this investment an unwelcome distortion of the British property market to the detriment of buyers. But we need a better mix of homeowner and rental property in the UK, and looking at other sectors it is clear that Britain does very well out of overseas investment. Car manufacturers, confectioners, football clubs and (most recently) developers of artificial intelligence have all embraced (or rather, been embraced by) overseas investors. Sure, some of the returns go abroad, but given that a lot of the money earned is then reinvested here, we shouldn’t be afraid, we should be saying: bring it on!

The healthy returns offered by a bullish stock market (recent timidity aside) and home ownership schemes like help to buy (which incentivise house builders to build owner-occupier homes), could lure investors away from build to rent.

Build to rent projects face specific problems which are limiting the number of projects to invest in. The length of time it takes for revenue streams to come online and the long-term management costs of a PRS development mean that local authorities have to be more sensitive to the extra costs they impose (through affordable housing and CIL requirements) to avoid dampening this enthusiasm.

The news about housing is usually all bubbles and bureaucracy, but amid all the gloom we have an opportunity. For build to rent, this year could be make or break.

Robert Flint is a solicitor at Winckworth Sherwood and a member of the Private Rented Sector team. He has written for Policy Exchange and used to work for Alan Duncan MP. He lives in a rented flat in Hammersmith.


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