Invesco says UK rental market promises strong investment returns

Institutional investors are ignoring the residential market in the UK at their peril. The sector has continued to outperform other asset classes, according to a new research report from Invesco Real Estate, and presents good opportunities for investors as the market grows.
The opportunity is laid bare in a new report from Invesco, harnessing the power of its global research team in a H2 2014 European Market Outlook. The report reviews all types of property investment, from retail to offices, industrial and hotels as well as residential; and sets the opportunities in each market segment against one another and against peer country markets.
The report reckons the UK private rented market to be worth around £990 billion, making it the third largest residential investment market in Europe, at the moment. “Our research shows that despite rented being the fastest growing tenure and the highest performing real estate asset class in the UK, less than 5% of rented housing is owned by institutions,” says the report.
With more institutions entering the market, it is likely to become more transparent, and more liquid. Overseas investors are likely to head to the UK, as existing stock in Germany and Holland looks relatively expensive. And, with the UK population set to grow, and no apparent political will to solve the supply shortage, demand will remain strong.
Invesco says the fundamentals are good. “Forward funding development to create the stock, with the focus on the strongest markets of Greater London, the south east and major UK regional cities, should generate strong returns.”
“We forecast that capital growth should be strongest in London and the south east, where the shortfall of good quality PRS is at its greatest.”

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