Two new reports show the potential rise and rise of Build To Let - good news for the private rental sector as a whole, but arguably a challenge as well as an opportunity for agents.
Build To Let is the industry term for the practice whereby institutional investors (not always ones with track records in the residential sector) fund the construction of blocks of apartments. Instead of selling units, as has been the trend for decades, investors retain ownership but them let them out directly or through agencies.
Only one per cent of the UK's private rented housing stock is currently owned by institutions. In the US it's 13 per cent in the US, in Germany it's 17 per cent. The total is 23 per cent in Switzerland and 37 per cent in the Netherlands, according to data firm IPD.
However, the model is more common in the UK student accommodation sector.
Until recent years, individual private landlords or students' parents would buy one or more homes, then rent them to students usually via lettings agents. But increasingly universities are commissioning the construction of blocks, often in joint ventures with specialist builders, and then retaining ownership and controlling the letting process after completion.
Surveys from the consultancy arms of Knight Frank and Jones Lang LaSalle suggest this model is likely to proliferate across the UK's wider PRS in the near future.
Knight Frank says that while Build To Let is already established in some London developments, the PRS markets in Bristol, Birmingham, Manchester, Leeds and Glasgow may be mature enough to attract institutional investors too.
Jones Lang LaSalle suggests the institutional investors will want to create what they call branded private rental communities' - in other words, blocks of apartments or possibly even estates of houses, privately let but with distinctive characteristics to make them stand out from mainstream old-style' buy to let units.
Both reports emphasise that large scale multi-national funds are interested in the UK's private rented sector because it is tipped to increase to significantly in years to come: from accounting for some 16 per cent of all households now to as many as 24 per cent in 2025 according to some forecasts.,
What is less certain is how the model will play out for existing lettings agents: will they have a role when the owners manage the lettings too
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