UK - Institutional investors have been warned against mistiming any move into the private rented residential sector in the UK, despite the fundamental attraction of the emerging asset class.

Concerns were voiced at the IPD/IPF Property Investment Conference in Brighton last week that the next two - three years could be prove problematic for pension funds looking to enter the market.

Mark Callender, head of research at Schroder Property, said he was not "against investment in residential per se", but was concerned that investment case did not currently stack up.

"For market-rent residential to work as an investment over the next few years, it must be from an income perspective," he said.

"However residential yields are currently at record low levels and it would require a huge jump in market rents to close the yield gap with commercial property. That looks improbable given the weak outlook for employment and earnings growth."

Schroder Property forecasts house prices to be kept down by weak employment growth, sluggish earnings growth and limited mortgage finance. It also believes there is a significant chance that house prices will fall in 2012.

Meanwhile, Robin Goodchild, international director at LaSalle Investment Management, said private rented residential offered a "fantastic return profile" and was one of the few asset classes to match and often exceed wage inflation.

Goodchild, who is also chair of the Investment Property Forum's (IPF) residential special interest group, told the audience in Brighton that the two main challenges were accessing the right management and the necessary scale.

Richard Donnell, director of research at Hometrack, said it would be possible to aggregate building stock to satisfy institutional requirements in terms of size of scale. He cited the existence of 5,760 housing development sites yet to be started but currently registered with the National House-Building Council (NHBC).

Peter Vernon, chief executive at Grosvenor, said his company's residential holdings - approximately 45% of its holdings in the UK - outperformed its commercial real estate investments.

He agreed that the next two-three years presented a timing issue for investors, but said the more important question was whether institutions would look to implement a meaningful allocation to residential over the long-term.

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