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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11:22 AM, 7th July 2023, About 11 months ago

The model of letting at LHA rate is fundamentally flawed. If you haven’t seen the debacle that was HOME REIT please look into as proof of this. Many other examples.

Some property investors scam the system by applying for what is in effect a rip off of the state benefits system…’Exempt Rents’. This is basically disapplying LHA.

That said, insurance cos etc will do this as they earn huge management fees and bonuses from mis investing. The incentives are not aligned.

Hope that’s interesting perspective. All said JLL are correct!

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