Last week, the Northwest Insider event looked at issues around housing supply and demand. Life by Ringley MD Sam Hay was there, so for those of you who are interested, here are a few of the most interesting takeaways.
When it comes to rental values, build to rent property continues to command a premium. Pounds per square foot does not come into BTR, instead it’s all about quality of product. Rental growth for July was around 1.13% but Andrew Cook from M&G commented that there will be pressures on pricing as more schemes come onto the market.
Low entry costs on BTR flats are making things much easier for renters. Increasingly, people want a transient way of life and easy entry and exit, so they are likely to try different buildings before they settle longer term. Lifestyle choices are changing fast and renting is no longer frowned upon. Renters react positively to being viewed as customers, not tenants; maintenance issues are dealt with fast and longer-term leases are expected to take off. As a result, BTR is a huge growth area with 1.4 billion total investment this year in Manchester alone. Manchester is currently at the hub of BTR and is very much being used as a test case. Manchester City Council thinks there will be an undersupply but at this moment in time, due to Section 106 requirements, consents are slowing down.
One downside of the BTR explosion and the high demand for one-bedroom homes, according to Tim Heatley from Capital and Centric, is that Manchester city centre is not ready for families. Chris Shaw from Urban Splash agrees. He thinks offers in our town centres need to change, and there should also be schemes in rural areas. Maybe with new ways to sell being considered, such as pre-approved mortgages where you turn up and pick your home. At the moment it is easiest to develop BTR schemes in city centres and building an investment case in other locations can be difficult.
Lambert Smith Hampton told the Northwest Insider audience that 54% of all housing investment in the North East is now for ‘alternative’ homes, such as BTR and student accommodation. The success of the latter in Manchester and other university towns has provided a model for new developments in the region. Diversification and a huge undersupply of high quality residential housing are now driving investment in residential portfolios as opposed to the standard commercial property investment model. There is even an argument in favour of BTR as a separate asset class.