UK - The UK government has rejected proposals to help attract institutional investment in residential property despite growing interest in the sector.

HM Treasury ruled out giving financial support to increase the delivery of homes to rent, claiming institutional investment would remain a "niche" part of the sector.

At the same time, the Greater Manchester Pension Fund, one of the largest local authority pension schemes in the UK, revealed it was considering investing in social housing projects.

The pension fund's development vehicle, the Greater Manchester Property Venture Fund, has £200m (€241m) to invest in real estate developments in the northwest of England and is externally managed by GVA Grimley.

Damian Masters, development team director at GVA Grimley, said: "Traditionally, we haven't undertaken any residential development.

"Everything we have done has been commercially based, but there is a feeling residential, particularly social housing, is something we should look at going forward."

But the UK government has rejected proposals to increase the cost effectiveness of residential investments for institutions such as pension funds, including the disaggregation of stamp duty land tax (SDLT) on the bulk purchase of homes.

The proposals were included in a consultation launched by the previous government.
Ian Fletcher, director of real estate policy at the British Property Federation (BPF), which has been lobbying the government for the changes, said the decision represented a "missed opportunity".

He said: "There is a huge hole in the Treasury's logic - on the one hand arguing that any change to the SDLT regime would 'carry a significant cost to the Exchequer', but on the other hand that this is a 'niche' sector and that nothing would happen. They can't argue it both ways."

He said the good news was that private renting would have no shortage of demand, as people struggled to buy, and the government struggled to fund other housing provision.

"The bad news is that, with a little bit of public spending, the government could have leveraged in significant funding for housing from institutions," he said.

The GMPFV has not entered into any agreements to invest in residential projects, but it has been in discussions with a number of parties about potential investments.

Masters said the main objective for GMPFV was to "make money for the pension fund", but he said pension fund trustees had raised the topic of social housing and were interested to know if it were a sector the pension fund should be investing in.

Elsewhere, US-based Oaktree Capital Management has established a subsidiary to invest in student housing in the UK as part of its global real estate strategy.

Knightsbridge Student Housing is run by Robert Crompton in London, who previously headed Victoria Hall, the student accommodation arm of the O'Flynn Group.

Oaktree is aiming to invest £1bn in student housing, mainly in the UK, but also in continental Europe.