FPDSavills Research - private rented sector in 1998

Citation

(1998), "FPDSavills Research - private rented sector in 1998", Property Management, Vol. 16 No. 2. https://doi.org/10.1108/pm.1998.11316bab.008

FPDSavills Research - private rented sector in 1998

FPDSavills Research ­ private rented sector in 1998

Keywords Investment, Property market, Residential property

FPDSavills Research have identified £400m of new money that will be put into direct residential property by major investors during 1998. Three quarters of this will come from just six corporate investors who are pioneering large scale investment in the private rented sector. This is on top of the £100m that FPDSavills Research expect to see entering the emerging indirect investment sector and the normal turnover of around £2bn that would take place among small investors during the year.

These findings come from a survey which FPDSavills Research conducted of major, active investors at the end of 1997, the full results of which were launched on the 14 January 1998. The survey discovered who the major investors are, what they own, how they manage their portfolios, what their investment aims are and what returns they are seeking. The results cover a sample of investors who own approximately 2 per cent of all privately rented stock in Britain, totalling about £900m in value. Just their planned portfolio expansion for 1998 alone, if realised, would increase the size of the PRS by 1 per cent in a single year. Such rapid expansion could, FPDSavills believe, be severely constrained by supply availability.

Nearly half of the survey respondents stated that their investment holdings in the residential sector were for the long term (10+ years). This is in keeping with the government's wish to see more committed landlords rather than short-term speculators.

Robert Weaver of FPDSavills Residential Investment Portfolios comments: "The survey highlighted growing evidence that major residential investors are starting to appraise portfolios on the same investment performance basis as they use for commercial property." A third of the major investors questioned stated their preference to sell property on a "tenanted bulk basis" rather than as vacant, single units. "Traditionally, this has not been the case in the residential investment sector which is dominated by a large number of individual landlords holding very small porffolios", he adds. "Our research department believe that this change in investor attitudes will assist the expansion and viability of residential property by making the sector more liquid and eliminating the automatic discount of tenanted property to vacant possession value. In support of this finding we recently sold two residential investment blocks to corporate landlords for more than the combined open market value of the individual units."

FPDSavills Research believe, in the light of this survey, that a more mature and sophisticated residential investment market is starting to emerge. "As major investors purchase more property and remain in the sector longer, more players will enter and become active in the market", comments Richard Donnell of FPDSavills Research. "In turn this will lower any perceived risk associated with the sector and aid further expansion. Improved market data and an increased awareness of the sector will herald the beginning of the residential investment market as a fully fledged single asset class", he concludes.

For more information please contact Richard Donnell, FPDSavills Research. Tel: 0171 409 8865 or Robert Weaver, FPDSavills Residential Investment Portfolios. Tel: 0171 409 8878 or John Vaughan, FPDSavills Press Office. Tel: 0171 591 5714.