Aviva prepares for private rented investment push

Insurance company Aviva Investors is planning a major commitment into Britain’s private rented housing stock, and is likely to start buying its first homes during 2015. The company looks to remain a hands-off investor, using third party management rather than leveraging its own brand; and it remains unclear whether Aviva will invest in properties built specifically for rent, or buy ready-finished homes from housing developers.

Speaking at the RESI 2014 event in September, Andrew Appleyard, head of European specialist funds at Aviva Investors, commented: “We’re looking for a resilient income return and a resilient total income. We’re wanting around 7% total return year on year.” He said he expected the return would be more yield than capital growth, and would be looking over an eight to ten year time horizon.

Also at the event, he added: “We are looking seriously at the build to rent model. We see that very much as a forward commitment.” However, that appears to be contradicted in subsequent comments interpreted from an interview with Inside Housing,  who suggest Aviva will be buying into tranches of 50 to 200 homes on development sites, once the planning and construction risk is eliminated.

“UK institutions used to invest heavily in residential,” noted Appleyard, but had been driven out for reasons of regulation in the past, and “because the owner occupier market has boomed.”

But times have changed, he added. “The dynamics are right, there’s much greater demand for the rental model.” He also noted it is increasingly becoming part of the developer model in larger projects: “With an institutional partner, you can feel confident about building. The rental model is part of the solution – I think there’s an awful lot of opportunity.”

“I see the rental sector as being very attractive to not just UK institutions, but overseas investors too. There’s a lot of product coming through in the next couple of years, that institutions such as ourselves will be looking to acquire.”

Appleyard has subsequently suggested Aviva’s initial investment will be via its diversified funds, with the potential to build a dedicated PRS fund in future. The company will be looking at acquiring rental properties in the mid market, and expects to link up with a third party manager, potentially a housing association, to manage the properties.

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