A senior figure in the financial services sector says only Build To Rent can solve the stock shortage in the lettings sector.
Cedric Boucher – now chief executive of Hearthstone Investments and formerly a finance chief at AXA and Barclays Wealth – writes on the LocalGov website that “the golden ticket” for the private rental sector is to increase the volume and ensure housing stock is high quality, is well-managed and built in locations where it’s needed the most.
Only institutional investment – public and private pension funds, insurance companies and savings institutions – have the potential to make this change, he claims.
He cites a 2021 report by business consultancy McKinsey’s saying that an average some 16 per cent of a typical institutional fund will be devoted to real estate investment. “Even if a small proportion of this is diverted to the private rented sector, we will see a significant sea-change” insists Boucher.
He continues: “By investing in the private rented sector, institutional funds, typically seeking long term investments with stable returns, can commit for the long haul, providing well-maintained homes for average earners.
“A regional focus, for investors who want to see the fruits of their investment within their own area, can also be achieved through an element of a regional bias possibly within a broader investment portfolio, thereby delivering homes within a specific geographical area and creating employment locally in the process.
“When it comes to quality, institutional investors have an inherent commercial incentive to maintain properties well and to carefully select their residents and look after them. Good quality housing equals happy committed residents, which in turn equals resilient returns. Against a backdrop of a largely unregulated private rental market, it feels like a win-win situation.”
He goes on to argue that on the one hand the rental sector will benefit, with higher quality homes more attuned to current environmental needs.
In addition, residential real estate offers a good choice for institutional investors seeking to diversify their activities. Boucher concludes: “As an investment, it offers institutions steady, long-term, resilient income, with potential for capital appreciation over time.”
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