Posts with tag: build to rent

Build to Rent aims to lure tenants from buy-to-let

Published On: July 1, 2016 at 3:07 pm

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The chief executive of a newly-formed organisation servicing the growing British Build to Rent sector has expressed his desire to attract tenants away from traditional buy-to-let properties.

Mr Michael Green, chief executive of the UK Apartment Association said that in time, he hopes the sector will pull renters away from, ‘tired and poorly maintained properties.’

Build to Rent boosts

The UK Apartment Association is a trade body focusing entirely on new institutionally-funded and managed purposely-built rental accommodation.

Knight Frank suggests that Build to Rent could provide 5% of the country’s privately rented residential buildings by 2020.

Writing in his blog, Mr Green said Build to Rent will give, ‘ a high quality product tailored to the needs of modern living for a market that is becoming increasingly discerning and will demand certain levels of service.’[1]

Build to Rent

Build to Rent

USA trends

Mr Green notes that the USA, where Build to Rent is called ‘multi-family’ accommodation, has had a head start on Britain for the last 20 years, meaning its rental market is on a different level.

Green observes that, ‘over time as the multi-family offering in the UK develops, we hope that customers will choose to switch from tired and poorly maintained properties run by small scale landlords to new, professionally operated communities that offer resident services and amenities as standard.’[1]

‘This is when renting really becomes a tenure of choice that benefits both residents and the wider economy,’ Mr Green concluded.[1]

[1] https://www.lettingagenttoday.co.uk/breaking-news/2016/6/build-to-rent-chief-bids-to-lure-tenants-from-poorly-maintained-buy-to-lets

 

New organisation to drive professionalism in sector

Published On: April 18, 2016 at 11:07 am

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With residential landlords flocking to the sector in greater numbers than ever before, a new organisation promoting professionalism in the market has been launched.

The UK Apartment Association (UKAA), the first cross-industry organisation dedicated to the task, said it will focus on customer service and renter experience

Higher Standards

Championed by Housing Minister Brandon Lewis, the scheme has been designed to deliver more homes for rent with higher standards for tenants. What’s more, the UKAA plans to differentiate the multi-family housing market from the service provided by smaller scale buy-to-let landlords.

In a statement, Mr Lewis said, ‘I want to see the private rented sector respond to the nation’s housing needs by providing new forms of supply and improved quality and choice. I welcome the UKAA as a body that can help build the capabilities of the build to rent sector in this country, bringing together the needs of private renters with the institutional capital that wants to invest in meeting their demands.’[1]

New organisation to drive professionalism in sector

New organisation to drive professionalism in sector

Development

With over nine million renters in Britain and with demand still soaring, there are certainly opportunities for build to rent developers. In recent times, the numbers of developers and investors interested in projects have risen. However, there is still a way to go before renting is the professional and service led industry, driven by institutional investors, as seen in the states.

The first international partner of the US-based National Apartment Association (NAA), the UKAA will hopefully benefit from the experience its partner is able to provide.

Doug Culkin, president and chief executive of the NAA, said, ‘the NAA is eager to bring industry training, best practices and networking opportunities to the UK. In addition, our US members are increasingly seeing opportunities for global growth and are looking to NAA for guidance when entering a new market. Our partnership with UKAA will be invaluable to our association as we address the growing need for a global renting housing industry.’[1]

Founder of the UKAA and chairman of Chainbow, Roger Southam, also said, ‘This evolution of the rental sector is creating some interesting dynamics and raising many questions about what renting in the UK should and will look like. There is clearly a case for using the extensive experience gained by the US and working together to create a more professional market to ultimately give renters a better service.’[1]

[1] http://www.propertywire.com/news/europe/uk-multi-home-sector-2016041511803.html

 

How will Stamp Duty affect build-to-rent?

Published On: April 4, 2016 at 11:31 am

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Following Friday’s implementation of the additional 3% stamp duty land tax charge on buy-to-let properties, the housing industry has expressed its concerns.

The industry is worried about the impact the additional tax will have on the build-to-rent sector, which at present has 40,000 new units in development.

Losses

Based on average rental yields for a 10-15 investment in build-to-rent, the British Property Federation (BPF) predicts the tax will amount to the equivalent of losing a year’s income. As a result, the BPF believes investors will be re-evaluating potential investments into the sector.

The build-to-rent sector has already gained £4bn in investment since the start of 2016, providing quality privately rented properties with affordable value. Despite hopes to the contrary, the Government imposed the additional 3% surcharge to institutional purchases in last month’s budget.

How will Stamp Duty affect build-to-rent?

How will Stamp Duty affect build-to-rent?

‘Difficult to fathom’

Ian Fletcher, director of policy (real estate) at the British Property Federation, observed, ‘many institutional investors will find it difficult to fathom why something so good-adding to housing supply-is taxed so highly. Given that in many cases the tax will equate to a loss of a year’s worth on income, it is unsurprising that many investors are thinking twice about entering the sector.’[1]

‘As well as the direct financial impact, what we cannot also afford is for this to knock the sector’s confidence when there are so many units coming out of the ground and the potential for many more,’ Fletcher added.[1]

[1] http://www.propertyreporter.co.uk/property/will-stamp-duty-on-residential-property-slow-new-housing-delivery.html

Large investment in BTR should be exempt from SDLT

Published On: February 8, 2016 at 11:55 am

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In yet another contest against the increase of Stamp Duty for buy-to-let and second properties from April, the industry is calling on the Government to protect larger scale investment.

The British Property Federation (BPF) wants higher scale investment in residential homes protected from the tax hike. The firm argues that unless this type of investment is protected, the industry is at risk of losing much-needed funding.

Warning

In its warning to the sector, the BPF said that the higher rate of tax could cancel out the progress made by the build to rent sector since 2011. New data indicates that there are over 30,000 build to rent units with planning permission in Britain, representing a 47% increase since October.

Additionally, the BPF noted that since the beginning of 2016, there have been significant investments made in the sector. These include Grainger PLC, which pledged to invest £850m by 2020.

Further high-scale investors include Legal and General, working alongside Dutch pension fund PGGM to deliver a £600m build to rent investment plan. Greystar Europe Holdings, one of the largest housing investors in the United States, has announced the acquisition of a 26.5 acre plot in Greenford, West London. What’s more, the Royal Bank of Scotland has pledged £1bn in lending for the build to rent sector.

Large investment in BTR should be exempt from SDLT

Large investment in BTR should be exempt from SDLT

Exemption

The BFP has called for the introduction of an easy portfolio test that will exempt institutional investors with 15 or more units in their portfolio from paying the extra tax.

‘Since the start of the year, there has been investment in the build to rent sector on a scale that we have never seen before,’ noted Melanie Leech, chief executive of the BPF. ‘Following the changes that were made to SDLT a few years ago, investment in the sector has really taken off and it is great to see pension funds and other institutions now investing heavily in housing.’[1]

‘There is cross-party support for new housing and a better quality rented sector and we would expect the Government to recognise the impact that the SDLT surcharge might have on investment in new homes and the creation of a better quality rental product,’ she continued.[1]

Negative impact

If an exemption is not provided, there would be a significant negative impact on the sector, according to Andrew Stanford, UK residential fund manager at LaSalle Investment Management and chair of the BPF’s Build to Rent committee.

‘We were encouraged by the proposed exemption for large scale investors from the additional 3% SDLT,’ Stanford observed. ‘If the exemption was not implemented it would have a significant negative impact on our ability to invest in the nascent build to rent sector.’[1]

‘LaSalle intends to provide good quality, built to rent homes across the country for customers on their journey to home ownership or for customers who want the flexibility and security of renting a home with a long term institutional landlord,’ he added.[1]

Adam Challis, head of residential research at JLL, feels that the build to rent sector has a real opportunity to increase the quantity and quality of private rented properties. He noted that, ‘the 3% SDLT charge would undermine this once in a generation opportunity to give renters a better deal.’[1]

[1] http://www.propertywire.com/news/europe/uk-build-rent-tax-2016020811530.html

 

£1.4bn in Build to Rent investment this week

Published On: January 29, 2016 at 10:21 am

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The upcoming Build to Rent scheme has received a staggering £1.45bn worth of investment in this week alone.

Build to Rent, where institutions both fund and manage specifically built rental accommodation, is seen by many observers as a government-backed scheme to improve the standards of British lettings.

However, many within the industry are concerned that this will reduce the importance of buy-to-let investors.

Worries

Grainger PLC, Britain’s largest listed residential landlord, is the latest investor in the scheme and says it is going to spend around £850m on Build to Rent by 2020.

Helen Gordon, the new chief executive of Grainger Plc, said, ‘it is clear that swift and decisive action is required to capitalise on the compelling market opportunity and to enable Grainger to realise its potential of being the UK’s leading private landlord.’[1]

The firm’s latest trading statement to the City seems to suggest a restructuring of Grainger, to make sure it can obtain a share of the ever expanding Build to Rent Market.

Additionally, the company says it will, ‘re-allocate development team resources to deliver new PRS stock,’ and, ‘refocus the acquisitions team to improve access and conversion of PRS opportunities.’[1]

£1.4bn in Build to Rent investment this week

£1.4bn in Build to Rent investment this week

Statement Of Intent

Grainger’s trading statement also says, ‘as we look out to 2020, our PRS- led strategic targets are:’

  • invest over £850m into PRS assets to drive rental income growth
  • net rents and income to more than cover overheads, expenses and financing costs;
  • net rental income to exceed profit from sales
  • dividend will increase, reflecting the greater proportion of rental income

Just last weekend, Gordon said that Grainger’s Build To Rent offer would include tenancies ranging from six months to three years In length.

[1]https://www.lettingagenttoday.co.uk/breaking-news/2016/1/build-to-rent-is-coming–1-4-billion-in-investment-this-week

Legal & General Launches £600m Build to Rent Fund

Published On: January 28, 2016 at 9:28 am

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Legal & General has launched a £600m fund to build large-scale rental accommodation. The news arrives as many other firms look to make private rental homes an institutional asset class.

The new fund will take the total amount of institutional money in the private rental sector since the start of the year to over £1 billion – largely fuelled by insurance companies and pension funds seeking long-term, stable rental yields.

Initially, Legal & General will commit £300m from its own balance sheet, with Dutch pension fund PGGM adding the extra £300m.

Legal & General Launches £600m Build to Rent Fund

Legal & General Launches £600m Build to Rent Fund

However, the fund, which could borrow up to a further 50%, is likely to expand once developments are built.

The Managing Director of L&G Capital, Paul Stanworth, says the fund will seek to capitalise on increasing demand for rental homes, after tax changes for buy-to-let landlords push small-scale investors out of the sector.

He comments: “The rental sector has so far been dominated by individuals with buy-to-let properties, and there has been quite a bit of involvement from local authorities, but both of those are set to fall away. This will exacerbate the supply-demand imbalance.”

Additionally, institutional investors are likely to be attracted to the steady yields that Build to Rent schemes offer.

“The value of rents is significantly more stable than the value of house prices,” believes Stanworth.

The Build to Rent sector is already well established in countries such as the USA and Germany.

However, investors have been more willing to commit to UK funds this year, after support from local planners and the Government, which has exempted large, corporate developments from its crackdown on buy-to-let.

The Government’s proposed reduction in mortgage interest tax relief for buy-to-let investors will not apply to those operating through limited companies, and the extra 3% Stamp Duty charge for landlords will not be levied on those purchasing 15 or more properties in one transaction. Find out more about the changes and how they will affect you here: /contrary-to-popular-belief-buy-to-let-is-not-dead-insists-finance-firm/

Last week, Invesco Real Estate launched a £250m fund, with cash from five international, institutional investors. Additionally, LaSalle Investment Management, a US firm, bought property worth £55m as part of a plan to invest £500m into the sector. Gatehouse, a Kuwaiti-owned investment bank, also committed £100m.

Companies believe that a shift to renting among young workers will prove a huge change in the housing market, while house builders continue to fall short of the Government’s target of building 200,000 new homes each year.

Legal & General’s fund will begin with investments in Bristol, Salford and Walthamstow, northeast London, creating 650 homes. It seeks yields of 3-5% on completed assets.

The firm is also researching the use of modular construction in order to boost efficiency and avoid the skills shortage in vital trades, such as bricklaying.

Stanworth says the fund will take on the development risk of the new units, all of which will be purpose-built, and may split into two funds – one for developments in progress and the other for completed blocks, which will offer investors varying levels of risk.

He adds: “We have built this on a scalable model so we can add investors without having to restructure at all.”1

1 http://www.ft.com/cms/s/0/3f42ab82-c41d-11e5-b3b1-7b2481276e45.html#axzz3yWnpPo8L