Housing needs in the UK are changing amid declining levels of home ownership and lifestyle shifts. Rather than the traditional ‘buy-and-hold’ model, residential housing needs are shifting towards developments that are built for rent and aimed towards a specific demographic who are at a particular life stage, according to Tom Brown, managing director at Ingenious Real Estate, who adds that funding needs are changing to support these types of developments and this should lead investors to consider new ways of accessing the property market.
Brown says: “For many years, the typical approach to property investing has been through longer-term investments in buy-to-let and equity. While this ‘bricks and mortar’ approach has worked well for many investors, a fully-valued market in both the residential and commercial sectors means that capital appreciation opportunities are now looking limited.
“Instead, investors should be looking to work their property assets operationally through shorter-term loan opportunities, which are used to fund the development or redevelopment of buildings in niche areas of the market. By viewing property investments as operational assets, investors can access a growing market opportunity that offers the potential for greater long term reward.”
Why is the UK property market experiencing change?
“Homeownership levels have fallen dramatically among the younger generation over the last thirty years. In 1991, 67% of 25-34 year olds were homeowners compared with 36% in 2014. Meanwhile, private sector renting more than doubled between 1980 and 2014. This is not just a UK phenomenon. In the US for example, home ownership fell to its lowest level in more than five decades in 2016.
“Declining homeownership is resulting from both cyclical economic forces as well as longer-term structural trends. In the post-financial crisis years since 2008, tighter lending standards have reduced the availability of mortgage financing for first time buyers, as low interest rates and constrained housing supply helped to sustain high house price valuations, thereby acting as a further deterrent.
