Investment in residential property is being encouraged for pension schemes.
Property Investment Appealing for Pension Schemes
To meet the housing need of the UK, the Government requires institutional investment in property. Investment in long-lease property could be a stable way of making a secure, low-risk investment for pension schemes.
Previously, pension funds have leant towards commercial property over residential. Despite this, a report published last month by private equity specialist Sir Adrian Montague, advised pension funds to seek to invest in residential properties also.
The report continued to explain that within the UK, as there is no culture of institutional investment, it is rare. Just 1% of landlords have more than ten properties in their portfolio, whereas other parts of Europe see institutional investment as very common.1
Residential property investments can provide high returns, of up to 10% for institutional landlords. However, investment from pension schemes could present a challenge to individual landlords. Though it could professionalise the sector and enhance its reputation.
This could also benefit tenants, as it is more common for institutional landlords to provide longer leases, and therefore, more stability for tenants. This would satisfy the needs of renters in this sector.
As there is a shortage of rental accommodation, and high demand around the country, institutional investments could meet the housing needs.