Friday, 31 October 2014

Review to examine bars to institutional investment

The government will launch an independent review into investment in the private rented sector as it seeks to spark institutional investment.

In today’s housing strategy the government says it will ‘examine the drivers for and barriers to investment and place these in the context of existing landlords’ business models and tenant aspirations’.

The document highlights a range of measures to encourage institutional investors, several of which were trailed in the 2011 budget.

These include the relaxation of stamp duty on bulk purchases and measures to support the development of real estate investment trusts.

Developments that include new private rented homes will also receive government support through pilot projects led by the Homes and Communities Agency and in partnership with local authorities.

The first such site will be at Spencers Park in Hemel Hempstead, where land for rental homes will be put in as an equity investment. More pilot projects will be announced next year.

Readers' comments (7)

  • F451

    Perhaps it is as simple as institutional investors recognising that the high level of private rents propped up by 'housing benefit taking the strain' is simply not sustainable.

    Perhaps institutional investors look at the rent levels as a proportion of income across the European Markets and see that the lower rents and more comprehensive subsidy arrangements are a more sustainable investment.

    Perhaps institutional investors do not see it as their job to make good of Government folly and incompetence.

    Perhaps institutional investors are of the view that if they wait for everything to fall apart that they can pick up masses of stock for mimimum outlay when housing needs to be rescued in the same way as care.

    Just a few possibilities - I'm sure that there are others.

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  • Institutions will find it hard to compete with private landlords.

    People don't realise landlord provide their "labour" for free.

    Example: A tenant left the property and took the 'electricity key' with him. So it was impossible to 'top up' the electric meter. There was a debt on the meter, so no electricity at the property.

    I had to spend the entire day there waiting for the electricy man to show up and reset the electric meter.

    There is a lot of 'landlord's labour' that is unaccounted for and given for free. If it was an institution, they would have to pay someone to sit in the house, waiting for the electricity company to turn up. And the electric company will never give you a timed appointment!.

    Plus, there is the cost of travelling to the property....

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  • F451

    Don't be absurd - if landlords do it for free, who gets the profit?

    What do you want, the government to pay you an hourly rate on top of your earnings from the property too - it beggars belief.

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  • Rick Campbell

    There are an awful lot of tenants who do things for free -- and the government wants a lot more people to do things for free -- some might view that as 'slave labour' as sorts.

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  • Melvin Bone

    Concerned Landlord many institutional landlord( and some private ones) would have let the tenant sort out the electricity meter...

    You sound like a perfect landlord if you do not charge for your services. Do your tenants live rent free as well in properties you own outright?

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  • My comparison was between a private landlord and an institutional investor. An institutional investor would need to pay someone to stay at the property waiting for the electriticy guy. What is the going rate for someone to sit at the property?.

    As for the sarcastic comments: How can you show prospective tenants without lights? Most viewing being after work. How can you check the boiler? How can you clean the place without a vaccum cleaner?. How can you get tradesmen to carry out repairs without electricity?. Plus the mess of melting fridge freezer. If there is no electricy where are the tenants supposed to keep their food.

    You can't have a meaningful debate.....

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  • Concerned Private Landlord is correct.
    Re the Build to Let issues, yes institutional money does offer some economies of scale in the PRS, but as was pointed out (in the excellent now seemingly forgotten about Rugg Review), small scale private landlords deliver efficiently with lots of uncharged-able “sweat capital” which big investors have to pay out as wages.
    Taking this into account, at LettingFocus, we are not sure the institutional advantages (of economies of scale from large purpose built "to let" blocks) are as great as some advocates of "Build to Let" have claimed, which is why perhaps investment so far from this source has been so sluggish.
    All the same, we are sure that over the long term, the industry lobbying will pay off and more tax "efficiencies" / subsidies will be forthcoming for City investors - which will eventually make this PRS asset class worthwhile to invest in.
    With all the studies that have already been done into "Build to Let" (much of it on line for those that care to look) we think another review is rather a waste of resources.

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