Residential Investments sector to reach £146bn by 2025
Residential markets have vast market size growth potential and provide an attractive alternative to the more regulatory heavy and operationally challenging healthcare market.
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The residential sector continues its rapid expansion across the purpose-built student accommodation (PBSA), purpose-built rented accommodation (PRS) and Senior Living sub-sectors.
The recent Knight Frank survey of 43 leading investors in residential investments, representing £32bn of investment across the sectors, indicates that appetite for student property will remain steady over the short to medium term, while investors anticipate notable growth in investment activity across the PRS and senior living sectors in the UK.
The survey points to an increased diversity in residential investments in the future, with investors spreading their exposure across age groups and geographies.
Synergies in the construction and management of these markets and low correlation attributes of the residential income stream when compared to the more traditional real estate markets, make diversifying into the sector increasingly appealing for investors.
Residential rental growth has outpaced inflation over the last 10-yrs, growing on average by 2.7% p.a., while rental growth for student property has averaged 3.1% p.a.
Survey respondents expect rental growth to continue close to current levels over the next five years, with a slight uptick for London student property. Investors in PRS also expect rental growth for London to be stronger than in the regions. The senior living sector is expected to record slightly stronger growth across the UK.
Looking to the future, between 2019-2025 Knight Frank forecasts the PBSA market will mature from a £51bn to £65bn market, investment grade PRS will grow from a £35bn to £75bn market (in terms of both value of assets and total capital committed), and the senior living rental market will expand from a £1.3bn to £5.9bn market.
