Despite initial doubts that the build to rent scheme would be viable
outside of London and the southeast, it is proving popular with big
institutional investors and confidence is growing rapidly. The main
reason for this is that two major reports, including one by EC Harris,
have indicated that the scheme is likely to work very successfully in
53% of local authority areas.
Government Plans for the Build to Rent Scheme
The Build to Rent scheme was incepted in 2012 and £1billion was poured
into it. This was further topped up in the last budget, in the hope that
the scheme will attract investors into the private rental sector. The
aim of the game is to encourage investors to finance new, purpose built
rental accommodation developments. The government thinks that this will
improve the quality of homes in the private rental sector as well as
provide some extra competition for private landlords (and thus help to
stabilise rents).
Scheme Oversubscribed
A recent study by Knight Frank has indicated that the scheme is
oversubscribed. There are now more than a billion pounds worth of rental
housing development projects in the pipeline in London and other major
cities, including Manchester and Leeds. The average investment yield for
these areas was 6.6%, but for the last quarter of 2013, average initial
gross yields rose to 8.2%.
Knight Frank strongly believes that the UK rental market is still
growing and that investors are queuing up to pour their money into the
pot, which is good news for tenants, but not so great for private
landlords, as they could soon be facing stiff competition for
prospective tenants.
