SUSTAINING THE PROGRAMME: ATTRACTING SECONDARY INSTITUTIONAL INVESTORS Can this programme be sustained for a generation? Although there is a huge pool of assets that could be invested in UK rental housing, evidence given to the Commission by UK pension funds and Invesco Real Estate indicates “many institutional investors are hesitant in taking development risks associated with any real estate project... even though there may be significant attraction in the fundamental case for investment in UK rental housing”.45
International Real Estate Investors There are 10-15 large fund management firms that advise international real estate investors. Together they manage property assets for their clients with a value in excess of £300 billion.46 There are many reasons why international real-estate investors should be interested in investing in residential property for rent in the UK: • Compared with the US, the supply/demand dynamics of the UK housing market are more favourable. In other words, Britain has a housing shortage • In the US, investment in rental property has increased. Since 1990, rental apartments’ share of the National Property Index (NPI) of institutional real-estate investment in the US has nearly tripled, to over 25% of NPI market value. The sector now exceeds the 2011 NPI shares of both industrial and retail property47 • Over the last 20 years the total returns from US apartment investments have exceeded 9% a year, outpacing all other property sectors.48
There are good reasons to be confident that there will be a ready international market for UK communities with rental and shared-ownership properties once they are mature and have the necessary management and financial track records.
UK Pension Funds and Financial Institutions UK pension funds and financial institutions, with total assets of over £2,800 billion,49 are another important source of follow-on investment in mature communities which include rental housing. Many pension funds are seeking to increase their direct exposure to property investment, as the reports from Greenwich Associates and Aviva have shown. 24