New rental markets are we grasping the nettle?

Transcription

1 New rental markets are we grasping the nettle? David Sivewright Scottish Property Federation 24 July 2014

2 Key Issue Single greatest problem in today s housing market is lack of supply PRS at scale can significantly boost the number and rate of delivery of new homes Any reforms must support, not undermine, potential investment into the sector and aid economic recovery Institutional type investors are ready to commit and most need support from good quality property managers

3 What do investors need? What could PRS at scale look like? What are the PRS management needs? Who might manage PRS in future What is the way forward?

4 PRS Investor Requirements Variety of funds / institutions, however generally: Long term sustainable income growth Inflation matching or hedging Sustainable demand No over supply Good management and satisfied customers

5 Research Based Investor Considerations Income and capital growth Micro and macro economic growth factors Yields and costs (inc land) Benchmarking Local supply / demand factors

6 Investment Requirements Lot size: Generally 10 50m Units: Net yields: % Forward commit. and possibly dev. funding Professional, cost efficient management platform Individual sale potential (until market depth)

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9 Potential PRS Design Characteristics Higher density units (90% gross:net) Large number of 1& 2 beds more single aspect Hotel quality - including service desk / concierge High quality shared amenities e.g. gym, club room Typically unfurnished, durable and easily maintained Unquestioningly residential use but with commercial approach

10 PRS design American Multi-family 2 bed apartment Large : 900 1,100 sq ft Single aspect No internal hallway Equal sized bedrooms Walk in wardrobe / dressing Freestanding appliances

11 PRS design Multi-family examples, Boston area

12 PRS design Fizzy Living, Stepney Green, London Two bedroom Compact: 720 sq ft Internal hallway Single aspect Master en-suite plus main bathroom Pocket Living One bed 410 sq ft Two bed 620 sq ft All with internal hallways

13 PRS design UK examples

14 High Quality Professional Management Service led offer with focus on lifestyle / convenience Dynamic pricing model Additional Income e.g cleaning, storage, parking Aim for >95% occupancy and >50% tenant retention On site reception, sales and management staff 24 hour security and repair / maintenance Brand creation

15 Who are the future managers of PRS? Investor / property company in house teams Housing Associations Large scale managers operating nationally Specialist local letting / management firms Economies of scale to drive gross:net income efficiency whilst maintaining high service standards

16 The way forward next steps PRS Champion Preserve an attractive Tenancy Regime in Scotland Build to rent fund / early adopter guarantee? Building information base / market understanding Developing required management standards Different provision for renters of choice Start building!

17 PRS Tenancy Review Group In Conclusion The single greatest problem in today s housing market is lack of supply. PRS can make a significant difference to the number and rate of delivery of new homes provided in Scotland. It is vital that reforms to the tenancy regime do not undermine potential investment in the sector. The multiplier effect of new investment will bring enormous economic benefits and should, be actively encouraged and incentivised. Investor / management options are established but support is needed for the right schemes to get the market moving and prove concept. What is effectively an investment cottage industry has the potential to become an institutionally backed, high quality, professionally managed provision of new homes at scale.