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A Good Time To Invest In Generation Rent?

A Good Time To Invest In Generation Rent?

Martin and Co letting agents in Sutton have discovered that Insurer Prudential is buying more than 500 houses and flats to let in London and the south of England, in a calculated bet on years of good returns from 'Generation Rent'.

In a deal worth £105.4m, the Pru's real-estate management arm, Prupim, is buying a portfolio of 534 private rental units from upmarket housebuilder Berkeley.

This is the first time in a generation that a large institutional investor has dipped a toe in the UK's £840bn rental market and may herald a return to the pre-1945 era when insurance firms and other large funds, such as church groups, had bulging property portfolios.

The homes being acquired by Prupim are a mix of studio flats and one, two and three-bedroom houses in 13 locations, including Hendon, Lewisham, Croydon, and Gosport and Cirencester.

The deal follows last month's budget announcement from chancellor George Osborne that the "build to rent" fund  – intended to boost homes for private rent – would increase to £1bn, from £800m, as the government bids to encourage new homes for rent in a more "professional" private market.

Around 17% of all households – 3.8m homes in England – rent privately, up from 10% in 2008, as sky-high deposits and a squeeze on mortgage lending prevent people from getting a foot on the housing ladder.

Martin Moore, chairman of Prupim, which controls £16bn in global assets, said the deal was "a long-term strategic decision backing the private renting sector in the UK".

"We are buying this with our eyes wide open, because we believe this sector will continue to mature and develop and offer attractive returns."

He said the UK is "probably moving more into line with what is well-established in continental Europe, North America and Asia too, where not just young people, but families too, consider renting as a viable alternative to owning their own properties".

Tim Bannister, head of lettings at the Rightmove property website, said: "It is not surprising that the private rented sector is attractive to institutional investment given the on-going supply and demand imbalance within the market. More than half of tenants tell Rightmove that they are 'trapped renters' who would like to buy but simply can't afford to."

British housing hit a milestone this year - for the first time since the 1960s more people are living in privately rented accommodation than social housing. The latest English Housing Survey 2011 and 2012, published by the Department for Communities and Local Government in March, shows that 3.84 million people live in the private sector, a shade higher than 3.8 million in social housing.

The surge in the private rental market is mirrored by a fall in ownership levels – two thirds (65%) of all households are owner occupiers, down from a peak of 71% in 2003.

For many years seen as the lot of hard-up students or young footloose professionals, renting is becoming the "new normal" for millions, say housing experts.

For advice on letting property in Sutton, Morden or Worcester Park call Martin and Co on 020 8337 9647