Build To Let
Summary
Buy To Let is a fairly common practice in this country but Build To Let is a fairly new phenomenon. It is different elsewhere in Europe with countries like Germany and Holland having many people who have lived for years in blocks of flats owned by banks or other financial institutions.
Further Information
Research by Savills estate agency suggests the potential for Build To Let is massive. The private rented sector is dominated by individual Buy to Let landlords but most of them own fewer than five properties, although overall the industry is worth £100 billion. Direct institutional investment, by contrast, is worth over £4 billion while indirect investment via property unit trust accounts for £1.5 billion.
Savills predicts the amount of City money going into the sector will soar to at least £50 billion over the next 17 years.
Traditionally UK funds have been slow to get into residential property, preferring to focus on commercial ventures such as shopping centres and offices but some investors believe it is only a matter of time before City institutions start putting money into the residential market.
According to some housing analysts research suggests that the number of people renting is set to increase over the next decade.
Another boost may come from a change in the law that came into force at the beginning of 2007 allowing the creation of real-estate investment trusts (UK REITs) property companies that do not pay corporation or capital-gains tax.
As there is not enough housing stock out there it is believed by some that REITs and existing property unit trusts will look at building-to-let. One way of doing this is by working with an existing developer who already has some sites.
Potential tenants could win as growing numbers of professionally managed flats come onto the market.
The British Property Federation, a property industry organisation is supporting the push towards build-to-let. Others are sceptical about the spread of build-to-let as residential property is management intensive – finding tenants, dealing with repairs, chasing arrears and curbing anti-social behaviour, so institutions may prefer to invest indirectly.
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External Links
London Stock Exchange
British Property Federation - See report ‘Letting in the Future. Housing Manifesto 2006’
Build to Let