Institutional investment in UK residential property continues to grow, with a further £5bn set to enter the sector in the next 12 months.
According to an Investment Property Forum survey of 48 of its members, almost four-fifths of contributors have exposure to residential assets in their UK portfolios.
It said the cumulative value of these investments is almost £13bn, or circa 6.3% of all UK real estate assets.
Direct ownership remains the preferred method of holding residential property, with the value of those holdings representing around 58% of all residential assets.
Around a half of respondents invest via joint ventures and a third of respondents use private funds.
Gaining exposure via listed property company shares has limited appeal, with only five investors using this route, which represents a little over 1% of total investment, the IPF said.
Whilst investment in market rents/assured shorthold tenancies is the most popular form of property for investment – at 34% of all assets, development currently attracts around a quarter of total investment.
Twenty-two contributors provided data on their development activities, with the gross development value of these projects adding up to £9.8bn.
The IPF said that more than 50% of the current pipeline is earmarked for disposal, with 12 contributors intending to sell on completion, while only four are building exclusively to rent.
Eleven of the 48 participants in the 2014 survey do not currently invest in residential but only two have no intention of investing in the foreseeable future.
From the remaining nine contributors, up to £500m may be available for investment over the next three years.
The majority of existing investors plan to increase their investment in the sector over the next 12 months and the scale of new investment may exceed £5bn, subject to availability of suitable stock, across the full range of residential assets.
Planning issues and taxation (including VAT) remain of concern to both potential and existing investors.
Unprompted, around a quarter of contributors suggested a commitment not to intervene in the sector would be the most helpful response by government, the IPF concluded.
bridget.o’connell@estatesgazette.com
