Prospects for investment in the private rented sector
| DOI | https://doi.org/10.1108/14635780010345454 |
| Published date | 01 August 2000 |
| Date | 01 August 2000 |
| Pages | 507-516 |
| Author | Alan P. Collett |
| Subject Matter | Property management & built environment |
Practice briefing:
Investment in
the PRS
507
Journal of Property Investment &
Finance, Vol. 18 No. 4, 2000,
pp. 507-516. #MCB University
Press, 1463-578X
Received 3 April 2000
PRACTICE BRIEFING
Prospects for investment in
the private rented sector
Alan P. Collett
Senior Partner, Allsop & Co., London, UK
Keywords Private sector, Deregulation, Demographics, Investment, Yield, Valuations
Abstract After 90 years of decline caused by economic and social factors, the deregulation
and fiscal changes in 1988 brought about a structural change in the private rented sector. The
emergence of a true open market, altered investment criteria and demographic and lifestyle
changes have led to the creation of a multi-billion pound investment market. Investors,
managers and valuers have had to develop new skills and attitudes to adapt to these changed
circumstances.
Introduction
This paper investigates the background to the current state of the residential
investment market in England and Wales and looks at the prospects for the
next few years.
The market sector covered is the private rented sector (PRS) which is taken
to be that sector of the market in which private landlords let to individual or
corporate tenants. Properties leased to housing associations as part of a private
sector investment are covered but houses in multiple occupation (HMO) and
student accommodation are not.
Investment in the PRS has been increasing for the last decade following a
long period of steady decline. The reasons for this increasing interest, the
nature of the demand, examples of the types of transactions undertaken and the
valuation principles involved are also covered.
The twentieth-century experience
Between 1900 and 1990, the share of the total housing market occupied by the
private landlord fell from 90 per cent to 10 per cent. There was a complex set of
forces at work to produce this marked effect. Among them were:
.the rise of social housing, both local authority and philanthropic;
.statutory interference, particularly the effects of rent control and
security of tenure;
.the rise of the middle class;
.increasing affluence;
.rising expectations of housing standards at a time when landlords were
unable to obtain an economic return and had little enthusiasm for
increasing or improving their portfolios;
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