Institutional investors are now locked out of London\u2019s residential sector, according to the Investment Property Databank (IPD)\u2019s annual index.<\/p>\n
The wider UK sector, which last year produced a total 13.5% return, is at a crossroads, delegates heard at MSCI\u2019s presentation of its IPD residential property index today.<\/p>\n
The index tracks the\u00a0performance of 6,685 property investments with a \u00a33.5bn (\u20ac4.8bn) capital value.<\/p>\n
Record low yields for London residential<\/a> property investment have turned institutional investors towards the private rented sector (PRS)<\/a>, as potential first-time buyers also struggle to invest.<\/p>\n Yields in central London are now below 2%, IPD data showed.<\/p>\n Mark Weedon, vice-president and head of alternatives at MSCI, said there was now a \u201cde facto exclusion\u201d on central London for most institutional investors, at a time when concern over access to housing has \u201cseldom been higher\u201d.<\/p>\n In the week that the UK\u2019s prime minister announced plans to build 200,000 homes by 2020, investors in the country\u2019s residential sector were grappling with more immediate concerns.<\/p>\n \u201cIf you are looking to put money into the sector now, our data shows that investors seeking income will find themselves priced out by foreign investors and owner occupiers when trying to buy existing stock in London,\u201d Weedon said.<\/p>\n However, limited investment opportunities in\u00a0PRS are making life difficult for investors.<\/p>\n Speaking on a panel at IPD\u2019s presentation in central London, Ed\u00a0Crockett, director of residential funds at Aberdeen Asset Management, said the company was looking at PRS\u00a0development opportunities, but that there was very little stock.<\/p>\n The investment manager, he said, recently\u00a0made a \u201cbig, income-producing acquisition\u201d in the UK, having last year announced plans to invest as much as \u00a3500m in UK PRS.<\/p>\n The advantages of investing in developments outshine investment in existing assets, Crockett added.<\/p>\n He estimated that as much as 82% of the UK\u2019s existing PRS is more than 25 years old.<\/p>\n \u201cSelf-developed residential is a lower risk than commercial,\u201d Crockett said. \u201cAs it\u2019s designed for purpose and brand new, that means there\u2019s lower capital expenditure.\u201d<\/p>\n While development of PRS now seems to be the only option and London is over-priced,\u00a0Hermes Real Estate is looking beyond the UK capital, its head of strategy, Nigel Roberts, told delegates.<\/p>\n Roberts said its UK PRS fund, expected to produce a 7% return, will invest beyond the UK capital, with a 75% weighting to UK regions.<\/p>\n Hermes<\/a>, the investment manager owned by the BT Pension Scheme, last year<\/a>launched the fund with estate agency Countrywide,\u00a0seeded with \u00a395m.<\/p>\n \u201cThe\u00a0PRS sector is supported by a shift towards urban living and offers a favourable supply and demand balance,\u201d Roberts said.<\/p>\n \u201cUK regional cities are resurgent with new infrastructure and new powers.\u201d<\/p>\n Weedon said it was \u201cno surprise\u201d investors were now considering building to let.<\/p>\n In a survey of the 200 delegates gathered at today\u2019s presentation, half expected residential investment to return between 5% and 10% this year, with similar consensus for the next three years.<\/p>\n A separate study of the UK residential sector by Invesco Real Estate said UK PRS offered \u201cattractive opportunities\u201d for institutional investors.<\/p>\n The investment manager estimates that the UK PRS sector is worth \u00a3990bn.<\/p>\n The firm\u2019s report said \u00a32.5bn was invested in UK PRS last year as demand for rental property increases.<\/p>\n \u201cPRS has sufficient scale, transparency and return profiles to be of interest to institutional investors,\u201d Invesco said.<\/p>\n","protected":false},"excerpt":{"rendered":" Institutional investors are now locked out of London\u2019s residential sector, according to the Investment Property Databank (IPD)\u2019s annual index. The wider UK sector, which last year produced a total 13.5% return, is at a crossroads, delegates heard at MSCI\u2019s presentation of its IPD residential property index today. The index tracks the\u00a0performance of 6,685 property investments […]<\/p>\n","protected":false},"author":9,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,1],"tags":[],"class_list":["post-1164","post","type-post","status-publish","format-standard","hentry","category-news","category-uncategorized"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p9PjAq-iM","_links":{"self":[{"href":"https:\/\/poseidon-gp.com\/property\/wp-json\/wp\/v2\/posts\/1164","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/poseidon-gp.com\/property\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/poseidon-gp.com\/property\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/poseidon-gp.com\/property\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/poseidon-gp.com\/property\/wp-json\/wp\/v2\/comments?post=1164"}],"version-history":[{"count":0,"href":"https:\/\/poseidon-gp.com\/property\/wp-json\/wp\/v2\/posts\/1164\/revisions"}],"wp:attachment":[{"href":"https:\/\/poseidon-gp.com\/property\/wp-json\/wp\/v2\/media?parent=1164"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/poseidon-gp.com\/property\/wp-json\/wp\/v2\/categories?post=1164"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/poseidon-gp.com\/property\/wp-json\/wp\/v2\/tags?post=1164"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}