LOFT Interiors work in the private rented sector (PRS) is going from strength-to-strength as landlords continue to invest in the market – but they aren’t the only ones as some of the world’s financial powerhouses invest too.
A recent study by accountancy firm KPMG founds 17% of foreign investors were targeting student accommodation and the private rented sector. Britain’s struggle with housing supply is one of the key reasons foreign investors are so keen on investing. Foreign buyers tend to invest in PRS for ‘the long term’ and competition for assets is fierce.
There’s no solution on the horizon because there’s so little development in the pipeline. This is pushing investors to take risks to access the opportunities that offer the returns they are looking for.
Indeed, in a report by KPMG, they believe that the UK’s real estate sector will dominate all European property investment for the next five years. However, the same report highlights the fact that when real estate experts are questioned over the potential impact that changes to the capitalgains tax (CGT) regime may bring and its effect on the country’s housing market, nearly half said CGT changes will not affect property prices.
Number of tenants in UK doubled in 10 years
The fact that the number of people in the UK who are now privately renting their home has doubled in the past 10 years is also of great interest to foreign investors. In addition, landlords in the private rented sector have enjoyed profits of £107bn from capital growth in their property portfolios over the past five years.
Housing demand is expected to out-pace the UK’s economic recovery as foreign investors look to cash in on the demand. In another report, tough competition from Chinese, Russian and southern European investors has forced British investors to look outside of the capital. The UK is seen as economically and politically stable and this fuels further investment from foreign buyers.
Foreign investors pile into the UK’s PRS
Most of these investors are from abroad, spending £55 billion on commercial property alone in the UK last year, consist mainly of pension funds, sovereign wealth funds and insurers who are looking for steady long-term growth income from their investment.
Even with the general election in May, a predicted drop in investment will be a temporary blip say analysts as the foreign investment firms will definitely return to the UK’s PRS. Real estate firm Savills and investment experts M&G say another reason for the interest from foreign financial powerhouses is that property, particularly in the private rented sector, is outperforming traditional investments such as stocks and shares and offers better returns and yields.
Over the coming months, property analysts predict that foreign investors who are cash rich will follow local investors out of the capital and into the regions – where the economic recovery is beginning to take hold. This will mean that there will be substantial money from abroad pouring into the UK’s property market for the foreseeable future.