The UK government backed Montague Review is aiming to encourage greater institutional investment in what has been termed as ‘build to let’ homes, and this news has received enthusiastic support from the British Property Federation.
The review will be led by Sir Adrian Montague and will look at existing barriers which may be preventing greater institutional investment in the private rental sector, and how the supply of these properties can be increased to meet growing demand. The BPF Director of Policy, Ian Fletcher is to advise the review and will be part of a nine strong expert industry panel. The BPF is hoping the property industry will support this review and will send its views to the team.
Liz Pearce, Chief Executive of the BPF said “The industry has a golden opportunity to articulate why residential investment could be an attractive asset class for institutions, and what prevents the considerable interest in the sector turning into a greater flow of funds into it.” She went on to say “Sir Adrian is an excellent choice to lead the review, and I hope this call for evidence elicits a positive response. Our country needs a lot more homes and there has probably never been a better time to make the case for building-to-let.”
At the moment institutional investment in the housing from institutions such as pension funds or insurance companies is estimated to be less than £4.5 billion, which is a tiny amount in comparison with the £840 billion estimated value of the private rental sector. Although the private rental sector is rapidly growing it is dominated by landlords who lack the resources to underwrite new housing developments, and Savills recently estimated there is the potential to develop 125,000 new homes annually until 2016.
The government has already implemented a number of changes designed to make the property market more attractive to institutional investors, including changing the stamp duty land tax regime for bulk residential purchases and reforms to UK residential Real Estate Investment Trusts.