Institutional investors have a growing appetite for the private rented sector, but are being held back by supply shortages and market fragmentation, according to a new study from specialist investment manger Mill Group.
PRS is twice as popular as student housing, and seven times more popular than social housing, the Mill Group Annual Residential Survey III showed.
Out of 60 institutions polled this year, 85% had already invested in PRS, compared with 77 %in 2013.
However, respondents indicated that there were a number of barriers to investing in the sector. Lack of institutional-grade stock and the perception that PRS, along with student housing, is a “niche” market are holding back the growth of investment, according to the report. Overpricing of assets was also a concern for many respondents, with 37% citing it as a serious risk, particularly in London.
Over a third of respondents said that investment in PRS would increase if government were to implement Sir Adrian Montague’s recommendation to introduce a PRS use category for planning purposes.
There was a significant uptick in mandates targeting the sector this year, with 43% more focusing specifically on residential, and 12% more that allow residential.
Speaking at the report’s launch, housing minister Brandon Lewis said: “We’re determined to build a bigger, better private rented sector, which is why we’re pulling out all the stops to encourage more investment and more landlords to offer their homes for rent.
“Today’s figures clearly show a strong appetite among investors to put their money into our private rented sector, not least because we in government are looking to do the same, including through our £1bn Build to Rent fund, which is well on track to deliver 10,000 newly built homes specifically for private rent, and offering billions in government-backed guarantees to unlock finance at below market rates.
sophia.furber@estatesgazette.com
