IPF SURVEY SHOWS CONTINUING GOOD DEMAND FOR INVESTMENT IN UK RESIDENTIAL

Based on responses from almost 50 institutions and large-scale investors, the IPF’s 7th annual survey of investment attitudes and intentions provides an indication of the appetite for UK residential investment, as well as identifying persisting disincentives for investors.

Survey participants own or manage over £8.2tn of assets globally, of which UK real estate comprises c. £246bn. Key findings from the 32 contributors providing data include:

• UK residential investment represents 8.6% of respondents’ total UK real estate assets, averaging £520m per investor – a 20% increase on 2017.
• PRS (private rented sector) remains the most common form of investment, representing a little under half of the total. Development, either for retention (as investment stock) or for market sales, accounts for a further third.
• Almost 50% of assets are located in central London (Zones 1-3). A further 15% is situated in Zones 4-6 and another 13% in the South East, including East Anglia.
• Returns profile remains the principal reason for investing, though not as dominant a choice compared to 2017, followed by stability of income. Residential’s defensive qualities have become a more compelling reason to invest in the sector in the last year.
• Of the 14 contributors that currently do not invest in UK residential, the primary reasons given are unattractive pricing and the low-income yield offered by the sector.
• Two-thirds (65%) of investors (compared to 80% in 2017) intend to increase their holdings over the next 12 months, with three non-investors planning to gain an exposure to the sector.
• A net £8.3 billion is earmarked for investment in 2019 – the majority is likely to be channelled through development of investment stock (£4.7bn) and the purchase of existing and newly completed properties for private (market) rental (£2.7bn).
• London’s outer zones (4-6) is the most popular destination, with a target allocation of up to £2bn, followed by £1bn each for the South East and the Midlands.
• Two-thirds of investors intend to work with the public sector in the next three years, primarily to access sites for development and long-term retention for rental purposes.

Stafford Lancaster, Investment Director, Delancey Real Estates Asset Management Ltd and Chair of the IPF’s Residential Investment Group, commented, “The survey points to a good number of attractions and barriers to investing in the sector that have been consistent over the years. However, the clear signposting of defensive qualities is probably noteworthy and to be expected in the current environment. Also of note is the continued appetite for partnership with the public sector – the joint venture model in that area is now ripe for fundamental change. We are delighted to see a significant amount of capital potentially earmarked for residential investment generally and the hard work continues of providing viable, robust proposals for this capital to invest into. In a nascent market, this continues to be a challenge that will be overcome in time.’’

The research findings, which were presented to IPF members at a seminar in early December, are now available here. 

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