New research claims to dispel myths about the lack of institutional investment in UK housing compared with other residential markets.
The extent of home ownership, for instance, does not explain the level of institutional involvement, according to the study by Finance Ideas in the Netherlands on behalf of the UK’s Investment Property Forum (IPF).
The report also shows that levels of landlord protection have a “counter-intuitive” relationship with institutional activity. The UK and Australia have the most landlord-friendly regimes but the lowest institutional investment, in contrast with markets where tenants enjoy greater protection, such as Germany and the Netherlands.
Ben Sanderson, director, fund management at Hermes Real Estate Investment Management and chair of the IPF Project Steering Group that oversaw production of the report, said: “There are a large number of conventions and assumptions made about how and why residential investment differs around the world, which this paper successfully addresses, and there are some important lessons here for those of us involved in developing institutional investment in the UK residential market.”
The research identified four main factors that drive institutional investment in housing markets: steady income streams, inflation hedging, level of tenant protection, and maturity of the investment market.
Institutional investors generally favour apartments as these are more management efficient, but the nature of the physical housing stock is not a major determinant, the study found.
The role of social housing providers varies significantly across the countries surveyed, from 1% of the total stock by value in the US to over 30% in The Netherlands, but such dominance does not crowd out institutional investment.
Markets differ greatly in the availability of investment products, the research shows. The Netherlands, a mature market, has no listed residential investment funds but has 30 unlisted residential funds, for example.