The decision of property developer Berkeley Group to enter the private rental sector is bad news for tenants, it’s claimed.
Berkeley plans to let out 4,000 new homes across 17 of its brownfield regeneration sites in London and the South East as the first step in a 10-year strategy. It claims this is to meet unsatisfied demand for quality residential rental property built at scale in and around London, which it says is the country’s most under-supplied rental market.
“Having sold over 1,000 homes across five sites in the last three years to institutional investors on a forward commitment basis, we now believe that adopting a more strategic route to this market will drive best value for these assets by creating a portfolio of scale, professionally managed, with proven income levels stabilised prior to disposal” it tells shareholders.
However Rohit Kohli, director at The Mortgage Stop, describes this as “bad news for renters and homebuyers alike” and continues: “Big business increasingly entering the private rental sector is going to drive up rents and, with reduced housing stock for sale, send property prices soaring, pricing out even more buyers from the market. It’s a win-win for Berkeley, as this is an unregulated market where they can control the rents and prices. But it’s a dream-shattering blow to many aspiring first-time buyers who desperately want a place of their own."
Justin Moy, managing director at EHF Mortgages, agrees and comments: "Larger corporate landlords in the residential market will potentially be bad news for tenants, giving them huge control of rental pricing whilst maintaining a vested interest in keeping property prices high by controlling new build development. As a business model this is becoming popular, with Lloyds Bank already building a similar sizeable portfolio. Sadly, reducing property stock for first-time buyers will only drive prices higher for this ever-suffering demographic."
More negative thoughts come from Dariusz Karpowicz, director at Albion Financial Advice: "Along with Asda and TSB, who also announced their plans to become landlords, this sends a clear message that investing in UK rental property is still seen as lucrative. While it's becoming harder for smaller landlords due to increasing rules and regulations, bigger companies see this as an opportunity to establish a profitable investment. We’ll likely see more announcements like this, but it's not necessarily a positive development for the market.
“The entry of corporate landlords like Berkeley Group into the rental market could have significant ramifications. For tenants, it might mean more professionally managed properties, but possibly at higher rents. Reduced supply of homes for sale could drive house prices up further, making it even tougher for first-time buyers to enter the market. Institutional money flooding into the rental sector could squeeze out smaller landlords and limit buying options, leading to a more competitive and expensive housing landscape."
Finally Ben Perks, managing director at Orchard Financial Advisers, sees it this way: "Berkeley Group are making a bold move to monopolise the rental market, and the next government needs to keep an eye on this growing trend. These large corporates are the ones that should be penalised with tax restrictions, not those people who have one buy-to-let with pension provision in mind. If builders are keeping property for self-gain, it will reduce what’s available to first-time buyers. Whilst it will help with government house building targets, the household crisis will rumble on."
The comments were made to the Newspage agency.
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Is the penny dropping at last?
*Experts* ?
Corporate landlords account for less than 3% of the PRS. So much for a monopoly.
What Berkeley is doing is recognising that the traditional house-builder model of feast or famine doesn't work.
Real experts promote a 'tri-tenure' delivery model which builds homes for home owners, investors and social housing. This also maintains delivery of homes irrespective of the economic cycle. House builders make significantly more profit from home owners than they do from investors or social housing. So, to assert that fewer homes for sale will be available is nonsense.
My role in the sector is to work with government and ensure that the investment sector brings forward homes additional to those that would otherwise be built. This was the principle we adopted back in 2012 and one that holds today. In recent times when house builders have struggled to sell homes, investors have picked up the slack to ensure, where possible, sites are not mothballed or people laid off.
There's a lot of nonsense talked about BTR. Principally by people who don't understand the sector or by those with vested interests.
If you're really worried about monopolies: the three biggest house builders (Persimmon, Barratt & Taylor Wimpey) regularly deliver about 25% of all new homes, and the top 10, about 45-50% (University of Reading research) But of course, if your main business is financial services that probably doesn't concern you.
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