PLC Housebuilder Telford Homes has sold 150 homes in east London to M&G Real Estate for £63m, reflecting demand for rental properties
The London housebuilder has sold almost a quarter of its homes to institutional investors for rent, as demand for “built for rent” developments rises.
The company sold The Pavilions development in north London, with 156 new homes, to housing association L&Q for £67m in February. Last week, it sold another development of 150 new homes for rent in Carmen Street, east London to fund manager M&G Real Estate for £63m.
A spokesperson for the builder said:
“Over the last 12 months it has become clear that there is now effective institutional demand for high quality, well located developments to be ‘built for rent’.”
“The sales to L&Q and M&G are just the start of the potential for PRS [private rented sector] to become a permanent and more significant part of the group’s sales mix.”
The strength of the renting market in the UK is resulting in a growing appetite amongst financial institutions to invest their funds in big rental schemes, which have the potential to produce long-term cash flows. As demand for rented accommodation continues to rise, especially in the capital, where many move to work, and most young people can’t afford to buy.
Telford has partnered with other developers such as Berkeley Homes, and institutional investors, building large blocks of rental homes. The result is a shake-up the private rental market in some city locations, which has traditionally been dominated by individual buy-to-let landlords. Insurer Legal & General teamed up with a Dutch pension fund manager in January to construct 3,000 apartments for rent across the UK.
However, private landlords still represent over 95% of all UK private residential property owned for rent, though it is predicted that large-scale professional investment could reach 10% of the market in 10m years’ time.
Telford still remains heavily reliant on overseas investors in London, which accounted for 41% of its sales in the year to 31 March. The Aim-listed company reported a 28% pretax profits increase to £32.2m for 2015, with revenues increasing 42% to £245.6m. The full-year dividend was increased to 14.2p a share, from 11.1p.
Telford insists it will not be affected by a decline in demand for high-end properties, particularly in London, and pointed to the “housing crisis in the capital and a clear imbalance between the supply of homes and the needs of a growing population”.
Record profits for Telford Homes through ”built to rent” https://t.co/VQ0JcHWUlq
— LandlordZONE (@LandlordZONE) June 21, 2016