MIPIM UK: L&G’s Bill Hughes has said the investment management firm is planning to increase its £1bn exposure to build to rent relative to its commitments to student accommodation, social housing and homes for sale.
“I see more growth in build to rent than any other sector we’ve described, because I think the market opportunity is bigger and the economics there make most sense to the sort of capital we represent,” he said at an EG panel discussion, Will the trickle become a torrent in the private rented sector?
Private renting could rise to around 25% of all households by 2025, due to rising house prices, weak earnings growth and interest rates staying low, according to PwC. Overall owner occupation could fall to around 60%.
Jacqui Daly, director, residential investment research and strategy at Savills, said the sector has the potential to become a torrent, but isn’t there yet. “It’s more of a trickle than a torrent,” she said. “What we’ve seen since 21011 is more units coming through of what are called build to rent, so stock that’s being designed and delivered for the rental market.
“There are 100,000 units in the pipeline – so that’s quite a lot – and in the past 12 months alone it has doubled. So I think the sector is scaling up quite quickly. Willl it become a torrent? I think it has the potential to.”
Legal & General Investment Management – Real Assets, has £5bn committed to housing, with £1bn in build to rent and a further £4bn in student accommodation, social housing and its stake in housebuilder CALA Homes.
“I think our exposure to housebuilding is unlikely to increase,” said Hughes. “I think the social housing sector is going through some difficult times at the moment.
“The reason that is difficult as a lender to housing associations is that the security of income and the credit rating associated with housing associations, broadly is diminishing.
“There’s less government support there; the housing association model is diversifying, so I don’t see us doing a whole lot more in that sector, at least as a debt provider. Student accommodation we have done a lot of, but there are questions about whether that’s getting to capacity.”
• To send feedback, e-mail Louisa.Clarence-Smith@estatesgazette.com or tweet @LouisaClarence or @estatesgazette
