Institutional investors are increasingly recognising their crucial role in meeting residential property building targets in the UK and plan to boost funding levels, new research by responsible investment manager Downing LLP found.
The study with UK institutional investors responsible for around £405.6 billion assets under management found half (50%) strongly agree that institutional investment is central to delivering UK residential property building targets, while another 48% slightly agree.
That realisation is being matched with forecasts for increased funding over the next five years, Downing’s research found which was conducted with investors working for private sector and public sector pension funds, family offices and insurance asset managers.
More than one in five (22%) forecast a dramatic increase in the level of funding institutional investors provide for UK residential property between now and 2028 while 72% forecast a slight increase.
Mass market “for sale” residential housing is the property type seen as most likely to attract institutional money as it is regarded as the best investment opportunity in terms of returns, the study found.
Around 60% questioned identified mass market residential housing as the most attractive investment opportunity followed by 27% who said affordable housing. Twelve per cent highlighted single family rental properties while 3% chose later living housing and 2% multifamily rental property.
Parik Chandra, Partner and Head of Specialist Lending, Downing LLP said: “Institutional investors are aware of their significant role in assisting the UK to reach its targets for residential property development, and they are reinforcing this recognition with plans to increase their funding in this area.
“The focus of these investors on mass market residential housing aligns with Downing’s experience. We have observed a notable uptick in institutional investment in this sector compared to last year and expect this upward trend to continue.”
Downing’s team focuses on deploying funds from investors as secured loans to property developers delivering residential-led schemes nationwide as well as non-speculative commercial developments, and specialist sub-sectors such as student accommodation. Downing’s main focus within wholesale financing is on providing facilities to SME lenders predominantly in the property sector.
Downing LLP typically lends between £1 million and £25 million to experienced developers with the ability to go higher by exception. It lends up to 90% loan-to-cost and 70% loan-to-gross-development value.
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