Major investors pile in to UK rental homes despite regulatory fears

LONDON, July 15 (Reuters): Aviva, Legal & General and M&G are ramping up investments in rental homes in Britain, betting on long-term returns in a market where housing demand far outstrips supply, even though the country's new Labour government could impose tougher regulations.
Institutional investment in Britain's rented housing sector is playing catch up, as it accounts for just 2 per cent of the total rented stock, as opposed to more than 35 per cent in Germany and the US, according to Savills.
The rented sector - which includes student housing and retirement homes - has fared better than the wider commercial property market, which is facing tough conditions after a period of soaring borrowing costs and changing working patterns.
"Investors are really keen on all these living sectors, it's a bit like the battle of the beds," said Rebecca Shafran, head of alternative residential research at BNP Paribas.
Aviva, L&G, M&G and Royal London Asset Management told Reuters they planned to increase their investments in rental homes in Britain by hundreds of millions of pounds.
Aviva Investors has channelled 750 million pounds into the sector in the last 18 months and wants to triple that within three to four years. The company said its latest deal was with housebuilder Barratt to deliver 101 rental homes in Cambridge. Potentially stricter rental regulations are a worry but not as much as interest rates remaining higher for longer, Aviva Investors' head of real estate investment, James Stevens, told Reuters.
L&G has been amassing commitments from its insurance business and external investors to increase investment from 2025, head of residential, Dan Batterton, said. Any move towards rent controls needed to be carefully conceived to avoid deterring investors, he added.