Some interesting insights in this week's EG about the durability of the Build to Rent (BTR) sector from Robert Sloss, chief executive of the Hub Group, based on their analysis of residential sector performance during the Global Financial Crisis (GFC).
For me, the key takeaway was that during and after the GFC, amidst a storm of dreadful data from various providers, there was one data set that did not deteriorate significantly: residential rents. According to Hub Group, residential rental declines were extremely modest, ranging from flat to 1.8%.
This is because in the wake of the GFC, as unemployment rose, consumer confidence and purchasing power fell, and mortgage providers reduced LTVs and increased deposit requirements, the ability / desire of many to buy a home fell resulting in steady or increased demand for rented property.
Many of these patterns look set to be repeated over the coming months as Covid-19 bites on the economy, particularly affecting younger adults (those most likely to live in BTR). The durability of rents shown during the GFC should make BTR all the more attractive to institutional investors, seeking stable long term returns after the Covid-19 storm.
The added benefits of BTR as an investment class include its relative immaturity in the UK with only 152,000 units out of a housing stock of 29 million homes, offering scope for considerable growth, and its potential to act as a vehicle for much needed town centre regeneration, bringing communities back to hollowed out town centres.
We saw evidence of the durability of BTR in the early weeks of lockdown as the housing market ground to a halt and large numbers of renters and frustrated purchasers renewed tenancies as proposed moves fell through or were delayed.
The RICS is also on message, recommending that Material Uncertainty clauses can now be lifted for professionally managed BTR property of institutional grade.
So in the words of Sloss, the future is bright for BTR!
During financial crises, people have less confidence and purchasing power, resulting in steady or increased demand for rented property. This durability of rents should make BTR all the more attractive to investors, seeking long term, steady returns after the Covid storm.