Major Investors Take an Interest in Affordable Rental Housing for the First Time

16 January 2020 – Idealista

16 January 2020 – Idealista

According to a report prepared by PwC and the Urban Land Institute about the trends in the European real estate market this year, the residential rental market has a key role to play.

The report is based on interviews with stakeholders from across the real estate sector, including investment funds, real estate companies, institutional investors and financial entities.

The findings reveal that not only is the private residential rental market one of the top 10 most attractive segments for large international investors, so too is the affordable rental housing segment.

Specifically, the ranking of most attractive segments is led by the logistics sector. It is followed by nursing homes for the elderly, coliving spaces, private residential rental properties and student halls. In sixth position is the affordable rental-housing segment, at a time when access to housing is reaching crisis point due to growing urban populations and soaring prices.

This problem is not specific to Spain. Cities around the world are debating strategies and implementing measures to try to keep rental prices affordable. In 2015, Berlin took measures to limit rental price rises, but in vain. Rental prices rose by 36% in the city between 2015 and 2019. As a result, rents have now been frozen there for the next five years.

By contrast, Sydney has been encouraging private investment in an attempt to tackle its extortionate rental prices. This pro-market approach has reportedly resulted in a 110% increase in the number of residential units available for rent between 2017 and 2019 and an 8% reduction in rental prices.

Meanwhile, in Spain, whilst the plan is to introduce a rental price index to try to curb the price increase, key players in the sector, including Concha Osácar, founding partner of Azora Capital, and Ismael Clemente, CEO of Merlin Properties, insist that the solution lies in increasing the supply and not in intervening in the market through legislative changes. The business leaders explain that international investors are willing to enter the affordable rental housing segment because although it is not the most profitable sector, it is sustainable. Osácar and Clemente are firm critics of the proposed legislative changes, arguing that they will only serve to generate uncertainty, which is bad news for investors, property owners and tenants alike.  

Ultimately, investors are interested in generating returns and whilst the current political and social appetite for private intervention in housing is minimal, the opportunities and benefits that could emerge for everyone from public-private partnerships should not be underestimated.  

Original story: Idealista (by Ana P. Alarcos)

Translation/Summary: Carmel Drake

Original Story: Idealista

Translation/Summary: Carmel Drake