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Spotlight: Rental Britain

Research Article

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Demand for rental homes will continue to rise despite Government policies.

Summary

■ The rental market will still expand by more than one million households over the next five years despite measures to turn “generation rent into generation buy”.

■ The supply of rental homes is set to be constrained by the introduction of a Stamp Duty surcharge of 3% on buy-to-let properties and the restriction on tax relief on mortgage interest payments. Both measures are likely to limit the ability of private investors to expand their portfolios. This presents a major opportunity for large-scale investors to step into the gap created by a fall in off-plan sales to buy-to-let investors.

■ Mismatch between supply and demand will continue to underpin rental growth and attract increasing numbers of institutional investment at scale. We recorded investment deals worth a total of £2.6 billion in 2015 – a third of which was supported by institutional investment.

■ The lack of available stock is prompting an increase in deals to forward fund development for rent. We outline some of the routes to market that large-scale investors are using.

■ Investors are looking beyond London to cities with concentrations of households in the rental market. Our investment matrix highlights the cities with the best investment potential. Manchester, Reading, Edinburgh and Bristol top the chart.

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