UK residential property one of the most preferred country/sector combinations for institutional investors
‘The opportunity is clear and here to stay’, says Hearthstone
UK residential property has been ranked as one of the favoured sectors for investment according to the INREV Investment Intentions Survey 2024 report, further confirming the strong momentum that has been building for the sector over the past few years.
According to Cedric Bucher, CEO at fund manager Hearthstone Investments, the rise of UK residential property as a preferred asset class for investors globally has been stellar in recent years . Looking back only three years to the 2021 INREV report, UK residential property did not even feature in the equivalent ranking. Today, the sector is better understood by investors and consultants and with fund managers building a track record there is more and more data including the recent creation of the MSCI UK residential property benchmark.
Looking at the preferred sectors to invest in over the next two years, the INREV report ranks residential property in the top spot for the first time in the history of the survey, closely followed by industrial & logistics. Looking at Europe’s top preferred country/sector combinations, INREV includes UK/residential property among the top five combinations for European investors, and residential shares first place alongside UK industrial/logistics for non-European investors.
Cedric Bucher believes that the opportunity for investors in UK residential property is here for the long term. To date, the residential share of institutional property portfolios is less than 8% in the UK, significantly below the proportion in other markets. Institutional investment into the UK living sector, whilst growing fast, is still less than £100bn in a sector with over £1tn of value. The fundamentals for the sector are attractive for investors – a supply/demand imbalance, rental growth, resilient rent collection through cycles.
He comments, ‘A recent report from Savills, to which we contributed, outlined the structural need to deliver 1 million more homes for rent by 2031, and the key role that investors can play in helping to address the UK’s rental supply shortage.
“At Hearthstone we have built a track record over the past decade in single family housing for the UK private rented sector. The case for investment here is compelling. We’ve repeatedly seen strong and resilient returns for investors – stress tested by both the pandemic and cost of living crisis.
“There has been a shift from private to institutional investment in residential over the past 10 years with housebuilders adjusting their model and partnering with institutional investors right from the planning stage.
Cedric Bucher concludes, “In my view, the opportunity is clear, and here to stay.”