UK - Market fragmentation and unfavourable tax treatment are scuppering attempts to widen investment in the UK residential, Savills director Jacqui Daley said last week.
Unlike investors in residential, commercial property investors can access better tax terms, larger lot sizes, longer leases and better covenants. Daley also identified as obstacles the short-term investment horizon of housebuilders and developers, planning policy, and local resistance to develoments.
Low-yields for higher-risk investment and high management overheads made social housing provision equally unattractive, she said: "Social housing is an additional cost. It reduces profit and therefore supply. It's not worth it."
"There are no easy options," she said. "Local government must understand investors."
Daley claimed the best solutions would be to expand conduits for investing in the market via residential REITs and expand the remit of social landlords by increasing the number of professional operators able to attract capital.
Her comments came as IPD annual residential index reported a 17% return, up from 16.4% in 2006. Equities and bonds last year returned 5.3% and 6.4%, respectively.
In a presentation to launch the quarterly index, IPD's Malcolm Hunt said UK residential had outstripped other asset classes in 2007, with a "strong regional story spreading out from London".