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  • In the Spotlight

    Panel debate: Build to Rent vs. Buy to Let

    Buy to let landlords are on the way out and Build To Rent will dominate the sector in the foreseeable future.

    That’s the view of Scott Marshall, managing director of specialist finance house Roma Finance.

    He says his firm is already seeing more and more landlords using limited companies to maximise tax efficiencies on their investments, while individual landlords also have to face the welter of tax and regulation changes introduced recently.

    “Clearly a barrage of regulation and legislation is moulding a new breed of landlords. The days of the hobbyist landlord are numbered as the upkeep and management of rental properties becomes more onerous” says Marshall. ​

    Full/source article


    Legal & General announces that it has exchanged contracts on its largest Build To Rent (BTR) site to date located in Woolwich. This scheme has been acquired by co-investors Legal & General Capital and PGGM, as well as pension fund capital raised by LGIM Real Assets through its open-ended BTR fund.

    This site, known as Macbean, is Legal & General’s third BTR scheme in London, with existing developments progressing in Walthamstow and Croydon. With a total BTR pipeline of around 3,000 homes across nine schemes countrywide, Legal & General aims to have 6,000 homes in planning, development or operation by the end of 2019.

    Located near Woolwich Arsenal Overground Station, this brownfield site has been identified as one of the last development opportunities of scale opposite a Crossrail station, within one of the highest growth areas along the new rail line. Woolwich, within the Borough of Greenwich, is benefiting from intensive regeneration and significant investment in housing, transport, retail and leisure, and has become an increasingly aspirational location. With the improved transport infrastructure, the area needs a greater supply of housing to meet growing demand.

    According to the Government’s Objectively Assessed Housing Need consultation, 3,313 additional homes are required each year in the Borough. The Macbean development will be a significant contributor to this chronic shortage of housing.

    Subject to planning approval, the scheme is projected to deliver over 650 new homes, together with 21,000sqft of commercial space and a new public square. The development will comprise both private and affordable rental homes, split between London Living Rent and Discount Market rent.

    Through the creation of a BTR asset class, Legal & General is looking to use its sources of long term capital to help address the chronic lack of housing supply and meet the increasing demand for affordable, quality rental accommodation. Legal & General is involved in housing creation across the spectrum, backing a fast growing pipeline of over 80,000 new homes over the next five to ten years to provide high quality, affordable accommodation at all stages of life.

    Legal & General was advised by Colliers International on this acquisition.

    Dan Batterton, BTR Fund Manager at LGIM Real Assets, said:
     “Macbean is another great example of Legal & General investing in a location with significant urban regeneration potential and providing large scale sustainable rental schemes which will have a positive long term socioeconomic impact. The location is highly desirable for renters and, with over 650 units planned for the site, is of a size which will offer significantly reduced living costs thanks to economies of scale. Given the notable infrastructure developments in the area, such as Crossrail, it has been a target location for us to expand our BTR offering and we remain firmly on track with our growth plans.”

    Mathieu Elshout, Senior Director Private Real Estate at PGGM, commented:
      “As a responsible investor of Dutch pension capital, it is our ambition to build long-term partnerships with prominent UK real estate players, investing in sustainable developments with a positive impact on the build environment over the long term. Our growing BTR venture with Legal & General is delivering on this goal, adding quality stock within areas, such as Woolwich, which are suffering from a severe lack of housing stock, whilst supporting wider urban regeneration.”

    James Lidgate, Director of Housing at Legal & General Capital, said: 
    “As the UK’s population continues to grow and renting becomes a tenure of choice, delivery of high density, high quality developments with vibrant communities is becoming more and more important. This latest development, our largest BTR acquisition to date, is another step forward for Legal & General in its ambitions to tackle the severe housing shortage that the UK is facing, helping to address the significant supply and demand imbalance – both in the Borough of Greenwich and across London as a whole.”


    A Build To Rent operator is marking its 2,000th new-build home - an indication of how the sector is starting to grow more rapidly.

    SDL Group, working in partnership with Sigma Capital Group, operates under Sigma’s ‘Simple Life’ brand and - unusually for Build To Rent - majors in family homes rather than single-person or shared-tenancy apartments.

    The 2,000th home is in Middleton, Greater Manchester, at the Baytree Lane development, which encompasses 110 homes of either two, three or four bedrooms.

    Full/source story


    I'm very surprised that corporate finance is continuing to invest in rental property.

    Are they not aware of the threat of Corbyn who has stated rent controls will occur if he wins the next GE?

    Which is most likely.

    Why would you invest in an asset whose income possibilities will be constrained?

    Perhaps the BTR operators have calculated worse case scenario of a Labour Govt.

    If so then that is quite a recommendation for property investing.

    Shame Govt doesn't want the little people providing rental accommodation.

    There isn't much difference with corporate finance compared to BTL mortgages.

    The property risks affect all.


    Build to Rent forecast to become a key growth area in the UK housebuilding market

    Including residential conversions, there were around 258,000 new dwellings delivered across the UK in 2016/17, up by 13% on the previous year.

    For 2017/18, it is estimated the rate of growth has been similar, with 280,000 new homes being added. Average selling prices have also been increasing year on year over the same period, contributing towards strong growth in total housebuilding contractors output, which nearly doubled between 2011/12 and 2017/18, though forecast growth to 2021 is more modest.

    Source: Source: MHCLG - components of housing supply; net additional dwellings, England; Scottish Government housing statistics; Welsh Government housing statistics, Northern Ireland housing statistics

    Volume growth has largely been driven by increasing activity levels in the private housing sector, underpinned by a combination of low interest rates, competitive mortgage deals and especially the Help to Buy equity loan scheme.

    The key reason for this strong growth in value has been a marked shift away from 1-3 bedroom flats towards higher value 4+ bedroom detached and semi-detached homes, particularly across London, the South East and East of England. London has also been where demand for flats /apartments has also remained strongest. As with commercial properties, the luxury apartment sector has been a key area of investment for overseas investors, though following the EU Referendum result, confidence among foreign investors in the UK has been wavering.

    However, most other regions of the UK have also been affected by price increases, albeit to a lesser degree. While interest rates remain on the lower side, mortgage deals are likely to remain competitive although interest rate rises could easily reverse growth in the market. Affordability will therefore continue to be a key factor in sustaining demand, with the extension of Help to Buy equity loans in England through to 2021 expected to underpin demand for private sector new housing.

    In contrast to the private housing sector, public sector housing completions have remained below Government targets, despite significant growth in demand for affordable homes. The main reason for this has been cuts to public sector funding, with the amounts available to housing associations and local authorities having resulted in falling investment in social housing schemes. However, with more housing associations now diversifying into affordable homes construction, there should be more of a balance between demand and supply over the longer term.

    “What has been critical to growth in net additions to the UK’s housing stock has been sharp growth in the numbers of conversions, which has been driven by government’s granting of permitted development rights for the conversion of empty offices into dwellings. Although there will inevitably soon be a shortage of empty offices suitable for conversion, we expect there to be a shift towards conversions of vacant High Street facilities” said Keith Taylor, Director of AMA Research. “There has also been a recent relaxation of permitted rights concerning barns and stable conversions, which should contribute towards growth in the total number of conversions over the next few years”.

    Taking these factors into consideration, we would expect the combination of completions and conversions to drive further growth in total completions and market values, to over 300,000 and over £42bn by 2021. Market prospects beyond 2019 will largely depend on levels of confidence among both consumers and business within the context of ‘Brexit’, the uncertainty of which leads to some degree of procrastination on the part of investors at this stage.

    Purpose-built private rented housing (Build To Rent) is forecast to become one of the key areas of growth within the housebuilding industry. As well as attracting some of the larger housing associations an increasing number of larger private housebuilding groups are also diversifying into this sector, usually in partnership with private investors.

    To achieve desired rates of return, the focus of their investment is on large-scale apartment developments - in key parts of London, the West Midlands and the North West – which offer economies of scale.

    ​As with PBSA, this is mainly being achieved through the increased specification of prefabricated building components and even full offsite building systems such as volumetric modular construction.


    "Loans to Build to Rent landlords have fallen 46% since the Brexit referendum and July 2018".

    JLL Residential Report 2019