In the majority of Western economies PRS is an established investment sector but not in Britain, where long-term renting is still perceived as unusual. People in the UK like the idea of owning their own home and there are even the few who dabble with the idea of owning more than one home.

Key in Door

Tower BlockThere has been considerable speculation about what investing in the Private Rented Sector (PRS) in the UK really means.

Times do change and many different private equity and institutional fund managers have been sizing up the PRS market to see if they can make the numbers work.

However they are encountering numerous problems: the lack of potential scale of the product, the lack of creditable returns for running an operation once established, and finally the determination of the UK populous who are unwilling to set up home in a large block of flats - even if they are full of the latest technologies! Indeed the Grenfell Tower tragedy may well have made many people think twice about living in flats now or in the future. Certainly the need to ensure the safest possible accommodation for everyone will be prominent in every investor's mind, just as it should be.

There has been a lot of talk about 'brand identity', 'customer experience' and 'added value', all phrases that could be deemed as meaningless management jargon. However this is what the customers looking at these large blocks of flats (and that is what PRS really is) want. If they are going to live in a property long-term then they can be confident that the place is pleasant, has a good ambience and that the hefty rental payments are worthwhile.

“Many different private equity and institutional fund managers have been sizing up the PRS market to see if they can make the numbers work.”

Get Living London This has of course been done well.   Get Living London 's schemes on the Olympic Park and at Elephant & Castle in London are highly successful and arguably the most high profile and impressive scheme in the UK. The product is excellent and the size and scale has encouraged the investors - Delancey , Qatari Diar and APG - to continue to expand their ideas. Other investors are working out how to make this work. They range from big institutions like Hermes (their joint venture with estate agent Countrywide) and Legal & General (as part of their infrastructure programme) through to a myriad of highly ambitious and clever private equity organisations. Likewise some large affordable housing organisations have created PRS brands, such as Folio (by Notting Hill Housing), and there are many local government bodies looking to see if they can provide PRS homes (Homes for Reading (Reading Council), as well as the Luton Borough Council / Cheyne Capital joint venture, spring to mind).

 

London Flats“If customers are going to live in a property long-term then they can be confident that the place is pleasant, has a good ambience and that the hefty rental payments are worthwhile.”

Student BedroomThe latter have been heavily involved in student accommodation for a number of years, a market that continues to expand, and PRS will hopefully follow suit. Unlike student accommodation, which guarantees a large population of people arriving in big cities between October and the following June every year, the population for PRS remains ill-defined. In time this is sure to change. There is still a demand to buy homes, and lenders are quite happy to give the majority of people the cash to do so. However the question is - for how long? The balance between house prices and incomes is so out of kilter.

If PRS is to thrive in the future there will need to be a range of private equity and institutional investors who will need to raise cash and then acquire suitable scale of product in the right places (probably town and/or city centres). Then they will need to create the type of place where people want to live long-term, whilst the investors get a capital return and strong dividend payments. In time this will happen, but there are many rivers to cross before PRS becomes part of the national psyche.

“There are many rivers to cross before PRS becomes part of the national psyche.”

And then we come to recruitment. Within the PRS, PSD has been working with investors on providing individuals in development, asset management and operations who can understand this relatively new market. There are certainly plenty of opportunities for those who can access debt, set up joint ventures and have links into organisations who have products such as local government and affordable housing. PSD's long standing working relationships with UK developers, affordable housing organisations and all types of investors has provided a steady stream of business that gives us a unique view of the marketplace that will, in time, be part of the daily fabric of British life.

“There are certainly plenty of opportunities for those who can access debt, set up joint ventures and have links into organisations who have products such as local government and affordable housing.”

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