PRS in figures – the numbers are growing

Major changes are afoot in the UK’s private rented sector, as institutional investors and a wide range of professional landlords start to make their presence felt in the business.

So, how big is the sector at the moment? And what are the other key metrics in the private rented sector right now? Thanks to Housing Matters, who in their March 2015 report, provided the following statistics, gathered from a range of sources including the government, Savills, the CML, the Association of Residential Letting Agents, and BDRC.

4.9 million – the number of UK households today in the private rented sector

84% – percentage of tenants who say they are satisfied with their accommodation

£27.4 billion – gross buy to let lending

56 – average age of a UK landlord; they will have around 8 properties, and have been a landlord for 15 years

close to 2 million – number of private landlords in the UK

19% – number of UK households in the PRS

2.5 years – average length of a private rented sector tenancy

2.8 years – average time a family stays in a private rented sector tenancy

1 million – number of additional private rented sector homes that will be needed by 2018

BPFletter

Better Renting for Britain campaign launched

A group of developers, pension funds and housing associations have started a campaign to promote the private rented housing sector. It says potentially £30 billion of finance is looking to invest in the sector, and has called on the new government to get serious about promoting building for rent.

An open letter, supported by the British Property Federation and signed by scores of senior executives from the development and housing world, calls on the new administration to focus on the potential of supporting the private sector to deliver. It calls on the incoming government to address five key action points:

• implement a national policy so that local authorities identify the need for rental homes, and allocate land accordingly
• support a Build to Rent industry team to work with local authorities, getting schemes delivered more swiftly
• modernise the approach to delivering rented housing
• allow the sector to continue operating as a market – in other words, avoid new restrictive legislation
• work with the private sector to promote best practice and help with improving the perception of the sector
The letter in full can be read here.
Among those supporting the initiative is Martin Bellinger of Essential Living, who commented:
“Now it’s our turn to positively disrupt the housing market. Renting can and should be about making people’s lives easier, offering them value for money and long-term certainty enabling them to create a home.”
While Nick Jopling of landlord Grainger added:
“We want to see a rental market that provides long term options as well as good value for money and customer service. By supporting ‘build to rent’, the future British government can encourage companies like ourselves to help increase housing supply and improve standards of living in the rental market.”
Stanford reflects on positive first year for PRS Taskforce

Stanford joins LaSalle Investment Management

Andrew Stanford, former head of the government’s Private Rented Sector Taskforce, has moved to LaSalle Investment Management to head the group’s UK residential investments.

As lead on the taskforce, his role was always intended to be a temporary one, helping the government push through its Build to Rent funding to encourage private rented sector developments; and generally ensuring key stakeholders engaged with one another to get new homes built for rent. He also spent considerable efforts speaking to local authorities, to encourage them to take a pragmatic approach to planning considerations.

“As UK Residential Fund Manager, I am responsible for the proposed LaSalle UK Private Rented Sector fund and am taking a lead in developing our overall UK residential asset strategy,” said Stanford of his new role. “As a house we are firmly behind UK residential as an asset class and have big ambitions in the sector.”

 

Amstone Developments plans more than 600 apartments for rent in Salford

Investor sought for major Salford PRS development

North west developer Amstone Developments has launched a search for a development partner to help fund its £130m private sector rental development in Salford, named Clipper’s Quay.

Agent Savills has been hired to seek out a funder and potential long term investment partner for the project, which includes 614 flats. The scheme won planning permission last year for a new build project on the site of a former cinema at Salford Quays. Also included in the development will be more than 17,000 sq ft of retail space, reports Property Week.

The Clipper’s Quay development is in Salford, close to Media City and the recently relocated headquarters of the BBC.

beherebarking

Willmott Dixon adds Barking PRS site

Developer Willmott Dixon has agreed to buy a site for 650 private rented homes in Barking, east London. The flats will be developed under the group’s Be:here PRS brand, occupying a 3.88 acre site adjacent to a planned Sainsburys supermarket.

The site has been bought from Estates & Agency Group, which previously won permission for the supermarket development on the Abbey Retail Park site. “Barking is a key milestone in Be:here’s plans to create vibrant rental communities at scale across London and other major cities,” said Andrew Telfer, chief executive of Willmott Dixon’s development division.

The addition means Be:here now has a pipeline of around 1,300 private rented sector units, including a development at East India Dock, which is just completing construction and will shortly be let. It is also under way with another project, this time in west London at the Vinyl Factory site in Hayes.

villafontordsall

Villafont proposes Salford PRS block

Manchester developer Villafont Homes has put its first private rented sector development across the desk of planners in the city. The proposal will deliver 372 one, two and three bed flats in a block of up to 15 storeys high.

Villafont has committed not to sell off apartments to buy to let investors, something that has become commonplace in Manchester, as its lower property prices appeal to amateur investors. The Salford area has also become a hot spot for rental apartments, with several major blocks in the area providing private rented accommodation, designed to appeal to young professionals working in the city centre.

Villafont is hoping that planners will agree to its request for the regular affordable housing contribution – normally demanded from private developments – to be waived. Under the city’s existing planning tariff, 20% of the units would need to be given over to affordable housing. In addition, it aims to argue for a reduced Section 106 contribution to local environmental improvements.

Iain Murray of Criterion Capital

Land must be unlocked to solve homes crisis

Guest post from Iain Murray, Director of PRS at Criterion Capital

As we head towards a general election politicians of all hue are finally acknowledging the severity of London’s housing crisis. The variety of economic, social and geo-political forces that have colluded to create this crisis are too complex to solve in one fell swoop, but there are incremental changes that can, and should, be applied to alleviate at least part of the problem.

There is a received wisdom that the current housing crisis is at least in part down to a constraint of development land. Yet, as well-developed as London is, there is no real shortage of available land. All 33 London boroughs have pockets of space available that they have not yet had the vision or incentive to convert into development opportunities.

Recent well-publicised initiatives, such as the Government Property Finder and Permitted Development Rights have gone some way to unlocking land and encouraging development in some areas, but there is still a long way to go.

London’s population is set to reach 11 million by 2050 and the current rate of housebuilding in the capital is worryingly out of step with this projected growth. Given that home ownership is increasingly beyond the reach for all but a minority of under 35’s and that London’s new inhabitants are likely to be younger, it stands to reason that there is growing pressure on the build-to-rent sector to deliver a significant volume of new homes.

Heavyweights such as Legal & General have stated that they are committed to investing £1bn into the sector, yet this has yet to convert into new homes ready for people to move into. At Criterion Capital, we have a pipeline of 4,000 units for delivery by late 2016 in areas such as Basildon, Croydon and Sutton and are actively looking for more development opportunity. In short, the demand is there but, as an industry, we just can’t build it out quickly enough.

Despite the weight of capital heading towards the sector, we have still not seen the level of development required to alleviate the housing shortage. We know from experience that the large institutions have an appetite for investment, but there aren’t currently enough development opportunities to build enough product, quickly enough to deliver the required scale.

This is where both central and local government must take a proactive stance in encouraging development in the build-to-rent sector. Unlike the traditional housebuilders, build-to-rent operators cannot be accused of siting on landbanks and manipulating values through a lack of development activity. To succeed, they need product out of the ground and generating income quickly. By any measure, this should sit comfortably with a government that needs to house a growing population in accommodation that is fit-for-purpose, sustainable and responsibly managed.

If this sounds too tall an order, let us remember that London’s government recently oversaw a powerful development corporation with the power to over-rule individual boroughs and unlock huge swathes of land for development quickly to facilitate the London 2012 Olympics. If this could be replicated to ensure the speedy delivery of much required new homes throughout its boroughs, that really would be a lasting legacy.

Iain Murray
Director of PRS at Criterion Capital

berewood

Grainger adds two Hampshire PRS projects

Grainger has won planning permission for two major build to rent developments in Hampshire. The schemes, at Berewood, Waterlooville and Wellesley in Aldershot will deliver 212 homes for rental.

The projects are both phases of larger phased residential developments, and have been brought forward from a planned start date that would have been years into the future. The permission at Berewood an innovative planning agreement with the local authority – another demonstration that planners can help unlock PRS projects in their neighbourhoods.

“These new build-to-rent developments will not only deliver much needed new homes in the local area but also support our desire to provide purpose built, quality private rental accommodation as well as accelerate the provision of amenities for the community as a whole,” said Grainger executive director Nick Jopling.

“Today’s news supports Grainger’s strategy to grow its market rented business and our increasing focus on investment outside of London, where we have extensive experience managing residential portfolios. Grainger is committed to the market rented sector where we can bring our long and established track record of managing homes to the highest standards for people across the UK for the benefit of all our stakeholders.”

At Berewood, Grainger has reacted to local market conditions. Local authority Winchester Council saw a major increase in the number of privately rented households in its area, up 50% between 2001 and 2011; an even more dramatic 100% increase was observed in neighbouring Havant. A deal with planners sees 104 new homes built with a guarantee they will remain PRS housing at market rents for at least 12 years, after which 40% of them – 42 units – will become affordable housing, and will revert to Grainger’s social housing subsidiary Grainger Trust. The deal effectively gives Grainger a 12 year guarantee of returns at open market rents, to recover their investment.

At Wellesley, the permission for the 108 homes for rent is not tied to future conditions. The project as a whole, which includes  3,850 homes, already has a provision that 35% of the total will be affordable.

The company says its commitment to the Hampshire developments proves that purpose built PRS development can work outside city centres, in more suburban environments.

Aberdeen invests £60m in Stratford PRS tower

Investor Aberdeen Asset Management has bought a 26 storey tower block of 166 let apartments in Stratford, east London. The deal indicates the appetite of long term investors in the private rented sector, and specifically in buying completed, well let developments.

The £60 million deal is part of a commitment from Aberdeen to invest around £500 million in the UK residential market over the next five years. The Stratford block will be held within the group’s Aberdeen Property Trust investment vehicle.

“This is the Fund’s largest investment into the private rented sector and it will provide a strong sustainable income stream to the fund,” said fund manager Gerry Ferguson. “It also helps with further risk reduction which has been one of the hallmarks of the Trust over the ten years which we’ve been managing it, and we anticipate adding more high quality private rented properties in the future.”

The block, originally part of a project named Athena, has an unusual history. It was due to be completed for the 2012 Olympics, before financial problems hit its backers. Only recently has it been completed.

Owned by Aberdeen: 180 Stratford

Owned by Aberdeen: 180 Stratford

Aberdeen already manages around £1.2 billion of residential assets, outside the UK, of which half are still being developed. Ed Crockett, property fund manager, said the investor has a large appetite: “This purchase is part of a wider commitment which Aberdeen has to the private rental sector. The property is in one of the most vibrant and affordable locations in London. The city’s population is growing at a rate most would associate more with an emerging market than a developed one, which is one reason that private residential units are an attractive investment for us.”

“Long term asset managers like Aberdeen are ideal landlords for private residential tenants. They bring the full weight of their experience managing real estates assets to bear on the growing private residential sector, and combine it with the professionalism which our own clients demand.”

Russell Chaplin, Aberdeen’s chief investment officer for property, added: “This is the latest in a line of private residential purchases which Aberdeen has made across Europe on behalf of its clients. The case for the sector to grow, particularly in Europe’s winning cities, is clear with the number of people predicted to rent property set to increase over the coming years. We believe there is plenty of opportunity to grow the amount of assets we own in the years to come.”

The block at 180 Stratford High Street is part of a larger scheme originally named Athena and started by the Irish McFeely group. The developer went bust before the Olympics in 2012, leaving the scheme incomplete. More recently, investor Long Harbour bought the building, completed the development and rebranded it, before letting all the flats over a four month period.

Long Harbour is an asset manager that has around £600 million of money invested across a range of property and infrastructure assets. The company called the deal “part of the natural turnover of Long Harbour’s PRS portfolio” and said it would be investing further in the private rented sector.

Student moves show the way for PRS investors

International investors are buying into UK student accommodation in a big way, as they open their eyes to alternative investment assets.

Two North American investors and a Russian oligarch have between them spent $2.5 billion in the last few weeks on UK student housing developments. The moves give a hint of the demand for residential assets that could soon head into the UK private rented sector – as soon as completed developments are available for sale.

The US buyers are Greystar and the Canada Pension Plan Investment Board. Greystar, which likes anything with beds in, has agreed to buy a £600m portfolio of Nido branded student housing from UK private equity seller Round Hill Capital, reports the Wall Street Journal. This follows the pension board’s purchase of UK student housing company Liberty Living, in a £1.1 billion deal that gives it 16,700 rooms across 17 cities.

Meanwhile, Russian oligarch Mikhail Fridman is reported to have splashed out around £532m for another student accommodation portfolio. And investor Carlyle Group has sold its Pure Student Living portfolio, which had grown to 2,170 student rooms across five London sites, to a Luxembourg based investor, LetterOne Treasury Services.

In the UK market, student housing has seen massive growth, with early investors profiting from the growth of a new dedicated market to house university students in purpose built accommodation on or near further education campuses across the country. Returns are now coming down, with prices rising as more investors move into the space. Real Capital Analytics assesses the average sector return at 5.8% this year, down from 6.4% last year.