Take-aways from National Residential Investment Conference
Today I have been talking about the rental market at this year’s sold out National Residential Investment Conference, held each year in London.
Among other topics, in the spotlight during the course of the day was JLL’s recent research on the institutional (non-Housing Association) sector. Having analysed seven residential developments comprising 911 units with an average scheme size of 130 homes, JLL reveals that average gross to net is 26.6% with an average rent premium of 9% for high quality build-to-rent developments and 3% rental growth.
The average tenant across these schemes is 31 years old, achieving circa 30% more than the mean UK salary. Tenants are prepared to pay to be in a BTR or multi -family scheme and are not over extending themselves with rent to income at 28%, compared to the UK over-burdened rate of 40%.
JLL also identified these net initial yields:
- London Zones 1-2 suggested yields 3.5%
- London Zones 3-6 suggested yields 3.75%
- Regions 4.15 to 5%
- Glasgow the highest at 5%
Urbanisation remains the trend, with 4bn of world's 7.5bn now living in cities.
The conference also threw up some interesting statistics on the changing nature of UK households. The number of people getting married is on a downward trend. In tandem with this, the average number of children per couple is reducing and people continue to start their families later than previous generations. The knock-on effect of all this is that two thirds (or 17 million) of UK households do not contain children.
In terms of future property provision, this means that what the UK needs are more homes suited to couples with no children, retirees and single sharers. As a result, we anticipate that micro-living solutions and co-living will get more air space going forward.
The Collective at Old Oak is one of the first purpose-built co-living developments in the UK.
So what is micro-living, I hear you say. Isn’t that just an HMO? Rightly or wrongly, for most of us HMOs tend to conjure up visions of badly converted, poorly maintained housing stock - not the purpose-built, thoughtfully designed new spaces now coming on line. The Collective at Old Oak is a good example, although arguably it could be termed student accommodation for grown-ups!
So the answer is surely not more HMOs, but well-designed spaces concerned largely with common, outside-the-apartment space. This puts me in mind of 1930s mansion blocks with their own restaurant and no individual kitchens to speak of.
At Ringley we manage some of these, which – without all the original amenities that have gradually been lost over time - are often now just cramped flats. I trust in future these shared spaces will be better designed and the 'outside-the-home’ spaces will be more about living than eating.
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