Blackstone, a US private equity firm, has agreed to buy a number of new homes in the UK to take advantage of soaring rental prices.
Blackstone has purchased up to 1,750 houses after striking a £580m agreement with developer Vistry.
Blackstone has signed a second agreement with Vistry within a year, as it continues to expand its rental business in Britain.
It has already agreed to spend £1.4bn, with the help of its investment partner Regis, on over 4,500 homes in the UK.
This is just the latest indication that Britain’s rental market is attracting more investment from pension funds and private equity groups.
Aviva Investors and Legal & General have recently invested in the build-to rent sector. They are building rental properties that will be managed by institutional funds over a long period of time, rather than by buy-to let landlords.
The aim is to capitalize on the extreme disparity between supply and demand in Britain’s rental market, which was fueled by landlords who sold their properties just as immigration levels were pushing up demand.
According to the Office for National Statistics, rent growth in the United States peaked in March at 9.2pc, before dipping to 8.9pc by April.
Rents in London rose by 10.8pc in April, a rise of 10.8pc on an annual basis.
Prior to this, the majority of investment in the sector was focused on large blocks of flats located in major cities which were rented out primarily by graduates and white-collar employees.
The funds, however, are increasingly focused on renting homes in suburbia, aimed at families who cannot afford to purchase.
Blackstone’s deal with Vistry involves a portfolio of properties concentrated in the South East England.
Leaf Living will manage the rental of single-family houses. Blackstone established Leaf Living in 2021.
James Seppala, Blackstone’s head of European Real Estate, said that institutional private capital could play a significant role in providing housing stock in the UK. This is especially true in the private rental sector, which is undersupplied.
Partnerships like these can help to alleviate the structural undersupply in the housing sector.
The majority of the homes will be finished in the next two to three years.
Blackstone is the largest alternative asset manager in the world, managing more than $1 trillion of assets.
In terms of investment, single-family homes represent the fastest-growing segment of Britain’s Build-to-Rent sector.
According to an analysis by JLL, while investment in flats for rent has roughly decreased between 2021-2023 from £4.6bn down to £2.6bn; investment in single family homes has nearly doubled, from £1.1bn up to £2bn.
The build-to-rent industry saw the highest investment in single-family houses during the first three month of the year.
Investors spent £620m on family homes built to rent, which is £170m higher than what they spent on flats.
As mortgage rates rise, the demand for single-family homes built to rent is increasing at a time that overall housing construction has declined.
According to government statistics, in the third quarter of 2023 the number of new home starts fell by 51pc on an annual basis, reaching 19,080.
Greg Fitzgerald, CEO of Vistry Group, said: “By partnering with organizations like Leaf Living, we can maximize the number high-quality homes that we deliver each year.
This year, we will be able to complete more than 10pc more new homes. We are playing a crucial role in addressing the acute housing shortage in the UK.
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