New data published last month revealed that financial institutions increased their investment in residential property by 189% to £2.2 billion up from £765 million the year before.
Financial institutions are choosing to invest in residential property for the same reasons that private buy-to-let investors are. They too are attracted by high tenant demand, high rents and a supply shortage – none of which show any signs of abating.
Stephen Ludlow, Chairman of ludlowthompson, comments: “It’s interesting to see an increase in investment in residential property by financial institutions, who have been eyeing up the sector for some time.
“There has been a growing trend away from homeownership towards the private rental sector, which large scale investment by pension funds and the like could accelerate. The UK could move closer to the German model, where renting is the norm rather than buying, if large scale investment is made in the residential property sector.
“Private investors might see large scale investors as competition but the reality is that financial institutions need to invest in large blocks of similar buildings in order to reach the economies of scale necessary to make a profit. Private investors can build a far more bespoke property portfolio, squeezing more profit out of each unit.”