BTL landlords will be ousted as City investors move in

BTL landlords will be ousted as City investors move in

0:01 AM, 20th June 2023, About 11 months ago 51

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As small buy-to-let landlords struggle to keep up with increasing interest rates, a wave of City investors is stepping in to fill the gap in the rental market, one property consultancy says.

The firm, JLL, is predicting that within the next three years, the build-to-rent (BTR) sector will double in size, making up 20% of all newly built homes.

The shift towards purpose-built rental properties backed by large pension funds and asset managers comes at a crucial time as BTL landlords face rocketing mortgage costs.

Over the past decade, institutions have poured £32.5 billion into the UK’s BTR sector, primarily focusing on student accommodations and inner-city housing aimed at young professionals.

‘Going to see a shift away from small landlords’

Emma Rosser, associate director for living research at JLL told the Daily Telegraph: “We are going to see a shift away from small landlords and that is going to be replaced with large landlords, the professionalisation of the sector.

“This rising tide of investment has been building momentum over the last decade.”

She adds: “We have come from a buy-to-let model where supply has really been built on debt.

“Now, it is going to be focused on equity. That is possible through very large, multi-billion pound pension funds.”

City investors are better equipped to withstand high borrowing costs

With significant financial resources, these City investors are better equipped to withstand high borrowing costs, allowing them to secure an ever-increasing share of the market as smaller landlords sell-up.

And the latest trend sees investors expanding their reach into suburban housing – a domain once dominated by traditional small-scale landlords.

This rental market shift could potentially reshape the housing experience for tenants and affect the investment strategies of both small and large players.

Make up 42% of build-to-rent homes

By 2025, single-family houses are expected to make up 42% of build-to-rent homes, a significant increase from the 13% recorded in 2022.

JLL predicts that institutional investors will build 88,000 new private rental homes within the next three years.

Although these figures are small compared to the existing rental market of 5.5 million homes, the rapid growth indicates that City investors are building a strong presence in the sector.

The real estate firm says that the financial muscle of City investors could also pose a challenge for BTL landlords wanting to re-enter the market in the future.


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Comments

Dylan Morris

10:15 AM, 20th June 2023, About 11 months ago

Reply to the comment left by Simon Orr at 20/06/2023 - 09:57
They’ll be breaking your door down, stabbing you to death and then living in your house. Police won’t get involved as it’s a civil matter.

david porter

10:17 AM, 20th June 2023, About 11 months ago

Reply to the comment left by Dr Rosalind Beck at 20/06/2023 - 09:30
rent controls simply lead to lack of investment. What happened in the 1950s and sixties? That should not be repeated.
housing associations and local Government simply do not have the fiancial resources as the country is over borrowed compared to GDP.
Big city players will have the financial resources to donate to think tanks. These think tanks will contribute to make advertisig at the time of an election.

Chris Brown

10:30 AM, 20th June 2023, About 11 months ago

Reply to the comment left by Simon Orr at 20/06/2023 - 09:34
Me too. I have always thought that this was behind Osbourne's unequal treatment of private as opposed to corporate landlords, so that he and his mates can pick up the easy pickings.
Surely the warning for the BTR brigade is the forthcoming 15 years of Labour Governments, rent controls, rights to buy, no help with meeting EPC C, B, A, A+?? whatever that will mean by they get round to defining it. There's no indication that any government or their supporting advisors decide what the want or will ever get it right first time. f like us you 've been through the agony of the Green Homes Grant EWI campaign, you will have experienced a programme conceived in haste, farmed out to American buddies to run, completely unsupervised or checked, with cowboys running riot over your buildings and then going bankrupt with the essential paperwork missing.
They don't seem to realise that if they don't mke it clear what the fnal standard is to be, intermediate work may all be nugatory. The should declare the start now, and allow all remedal and upgrading EPC works tobe set against earnings, not capital.
And g back to a level playing filed and admit that after 20years of adding regulations and liabilities, being a Landlord s a fulltme business.
I have been thinking of applying for demolition orders and rebuildng, or just leaving the lots vacant, but I imagine the compulsory purchase orders will come flying in.
Last time we had rent controls, my wife's uncle lived in a 5 Bed house in Hampstaed for £10 a month (1960s), same as he was payng in 1938. And he had such a fine job n the heart of the Establishment.
Can't wat for the Tory canvassers to seek my vote at my front door.

Chris Brown

10:37 AM, 20th June 2023, About 11 months ago

I was editting this, but was nterrupted and got timed out - please let me correct my typos..

GlanACC

10:37 AM, 20th June 2023, About 11 months ago

Reply to the comment left by Chris Brown at 20/06/2023 - 10:30
Here's a novel idea. As there is limited parking near one of my 2 bed properties - I could knock the house down and use the land as a car par for 8 cars. Charge them £30 a week = around £12,000 a year .. which is far more than the rent I get for the property.

Rob Thomas

10:56 AM, 20th June 2023, About 11 months ago

The truth is that large professional landlords have traditionally had higher cost bases and demand higher returns than typical buy-to-let investors. As a result, build-to-rent has targeted the higher end of the rental market.

I'm also doubtful that so-called professional landlord firms offer a better service. I heard of one that had a phone number tenants could call if there was a problem, and it often wasn't answered. So no response even when something serious was wrong e.g. broken heating.

So the so-called professionalisation of the PRS will mean much higher rents for no better service. We've seen this with student accommodation where purpose build accommodation is far more expensive than small landlords catering to students. Yet the politicians seem obvilious to all this.

NewYorkie

11:15 AM, 20th June 2023, About 11 months ago

Reply to the comment left by Dylan Morris at 20/06/2023 - 10:00
BTR is subject to the vagaries of the markets, and we have seen just recently how 'commtted' developments have stopped.

Regardless, BT is not for the average renter. It's targeting inner city and 'professional' renters, and as such will not be considered 'affordable' e.g. not covered by LHA.

Niccolo Capanni

12:04 PM, 20th June 2023, About 11 months ago

“Now, it is going to be focused on equity. That is possible through very large, multi-billion pound pension funds.”

I've previously been told that pension funds could not hold residential property or invest in companies that did. Including BTL, SA, HMO.

What is the interpretation here?

Dennis Forrest

12:39 PM, 20th June 2023, About 11 months ago

I am surprised that more BTL investors haven't moved over to holiday lets. Pension funds will not be interested interested in holiday lets. Holidaymakers want to stay somewhere that looks nice and not just functional. There often seems to be disruptions at airports which make foreign travel unreliable. With global warming our summers may be more reliable. My neighbours recently returned from Los Angeles and it was 10 degrees cooler than in the UK.
You have to work harder with a holiday let and be very organised. You can pay for a basic find a guest service or use Airbnb or go for, at a price, a fully managed service which besides the cleaning/changeovers attends to gardening, repairs and is virtually hands off. When you sell your holiday home there is no CGT to pay. You pay instead BADR which is Business Asset Disposal Relief at a 10% tax rate. Loans are no more expensive that BTL mortgages of you look around, often from the smaller building societies. I have almost just completed a 70%, 2 year fix remortgage on my holiday home at 5.0% and this is a discounted variable rate mortgage. It might go up a bit this week, but still be quite cheap. so after 40% tax relief it costs me 3%. You don't need to worry about bad payers or evicting tenants. Damages are usually quite minor like wine or curry spilt on carpets..

Darren Peters

12:52 PM, 20th June 2023, About 11 months ago

Reply to the comment left by Dennis Forrest at 20/06/2023 - 12:39
Not everywhere is suitable for holiday lets and it tends to be much more hands on so not as easily scalable.

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