It is understood that the fund is in response to a Government housing initiative launched in May to attract institutional investment into the housing market to finance new homes for private rent.
According to a report in the Financial Times, the venture will preorder purpose-built residential blocks in the south-east to rent out, mainly round big transport hubs and on significant regeneration sites that have stalled in the economic downturn.
A launch date for the fund and the fund’s size, which was reported to be targeting £1bn, are yet to be confirmed.
Aviva Investors head of UK specialist real estate funds Andrew Appleyard is understood to be looking to emulate the US model of large-scale multi-family rented housing, telling the Financial Times: “We are looking to do something here that has not been done before. We feel that the economics are right given where the market is heading. There is appetite for renting that hasn’t been there before.”
According to the Homes and Communities Agency a growing private rental investment market may help give the housing market more long-term ‘asset class’ investment characteristics similar to those of commercial property, attracting the previous buy to let type investors without the ‘bubble’ risk factors.
Could the new fund provide an impetus for the private rental investment market amongst retail investors or potentially harm it?
Hargreaves Lansdown investment manager Ben Yearsley says: “The only thing it will do on the existing retail market is possibly knock it. If there is £1bn worth of new property being built it could have a knock on impact on the rental market. It could be appartments are overpriced and all this new supply is coming onto the market so it could have a negative effect.”
Is the new launch a welcome development in the beleaguered housing market?
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