Investing in the UK Private Rental Sector

03 Nov 2019 - by highgrove

Investing in the UK Private Rental Sector

In the UK today, the build-to-rent sector or PRS has grown exponentially accounting for almost 17% of all households in the UK. The rate at which UK investors are buying these properties (mainly for rentals) is ever increasing. They stand to benefit more from both UK rise in house prices which is the investor’s acquired assets and from the rising cost of rent. It is crystal clear that the private rental sector will continually increase as time passes.

How can an investor or developer benefit from this great opportunity? And what are those salient matters you should understand? These and many more questions will be answered in the course of this article.

·       Understanding PRS and PBR developments

It is widely believed that in a few years to come, (say 15 to 20 years’ time), more and more people will continue to pay rent in the United Kingdom more than those who invest in their own home. The major reason for such a projection is the unaffordable cost for built-for-sale housing stock.

Another challenge is that a large volume of home builders are constantly working with tight margins as the residential structure market is becoming volatile. This has, in no small way, made the development of houses less attractive. Also, the decisions of the local government often take longer time, and this will surely prevent or slow down the builders of new homes.

In the South East and London, soaring house prices has led to a big buy up in the UK housing stock mainly by foreign investors.

·       Building in the Right Location

One of the most successful private rental sector schemes can be seen in urban areas with an indigenous mode of transportation within a short distance. About 140 units or more should be perfect, giving an opportunity to regional variations, whether in multiple buildings or single buildings. This is to ensure a good return on investment.

Studies have made it obvious that the private rental sector is not only viable in London, it is also viable in areas where you can find low land values and good employment rates.

Local authorities and governmental bodies view the impact of the private rental sector as a positive development because they support the local communities by offering the much-required homes. The UK government has introduced a task force and £10 billion debt guarantee for housing (mainly for buildings that are rented privately).

The housing zone program in London was introduced by the GLA to improve the process and balancing of housing provisions. A budget has been set aside (£500 million) with a favorable private rental sector planning terms and conditions in place to regulate agreements. This budget will be used for improving and developing the public environment, infrastructure, libraries, placemaking, and school building. They are essential elements that promote a favorable development for build-to-rent.

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