Agents’ predictions reveal a mixed bag for the UK’s residential market this year. JLL downgraded house price forecasts, anticipating subdued growth for the UK in 2019, with a stronger rebound in central London. Meanwhile, Savills announced that London house prices would decline, and pointed to the Midlands for growth.
As investors hold-off committing in times of political and economic unease, the growing build-to-rent market is becoming an increasingly-attractive prospect, albeit a competitive market.
BTR matures
This year, housebuilders may step up their focus on the seemingly Brexit-proof BTR market.
Andrew Screen, Cortland’s UK chief investment officer, says he has been approached by housebuilders “seeking to carve-out portions of large sites for BTR development in 2019”.
He adds: “This will present an expansion opportunity for BTR developers, operators and forward funders able to acquire large sites or enter into joint ventures with housebuilders to develop purpose-built rental accommodation.”
This means schemes of 250 or more units are increasingly seeing greater competition from a variety of parties. However, other developers point out that 1,000-plus sites are still a big commitment in a relatively new market.
James Lidgate, chief executive of Legal & General Homes, says: “We believe that residential property as an asset class remains a compelling prospect for institutional investors, particularly as more alternative options, including build-to-rent, continue to mature with a strengthening track record.”
As international and domestic finance from banks, pension funds, sovereign wealth funds, venture capital, private equity and insurance funds flock to the sector, others expect local government to step up too.
Mark Allnutt, senior managing director at Greystar UK, says: “With this backdrop we expect local government to be increasingly focused throughout 2019 on identifying professional partners who through innovative solutions can provide high quality space and service, and real long-term communities for their residents.”
Government intervention
Others also call for clarity from government for the supply of housing, as well as local regeneration plans.
Melanie Leech, chief executive of the British Property Federation, says: “Our sector is fundamental to driving economic activity, to the regeneration of our town and city centres and to delivering high-quality homes and we look to politicians of all parties to come together to provide a sound basis on which investors and businesses can plan with confidence.”
In 2019 the government will review permitted development rights, which enable developers to bypass local council planning teams and community contributions, foreign buyer taxes and developer contributions, reform of section 106 and the community infrastructure levy.
Paul Hackett, chair of the G15 housing associations group and chief executive of Optivo, argues that government grant increases will be essential for the delivery of affordable homes.
Hackett says: “This does require a rethink on subsidy rates per home – and I would argue now is the point in the cycle for government to invest in social rented homebuilding as a counter-cyclical tool to support the wider economy and to tackle the social and economic cost of the housing crisis.”
To send feedback, e-mail emma.rosser@egi.co.uk or tweet @EmmaARosser or @estatesgazette
