ATTRACTING institutional investors into the private rented homes market will depend on access to better information on financial returns and clearer standards, a property lawyer has said.
The warning comes after it emerged that pension funds are taking a renewed interest in the market in Scotland as new ways are explored to kickstart investment to help alleviate the country’s housing shortfall. Royal London chief executive Phil Loney, right, had said earlier this week that the sector now represents a “very attractive market” for firms seeking long-term returns.
His comments followed a report from trade body Homes For Scotland (HFS) which came up with recommendations that included developing a prospectus to attract institutional money into new rental housing.
But Caroline James, a real estate partner at law firm HBJ Gateley, said yesterday that while commercial property investment data was well-established and provided reliable information on returns, comparable data in the Scottish residential market was hard to come by and lacked the consistent input of landlords and property agents.
The Investment Property Databank (IPD), a global service, is the main source of property investment data but James said it would benefit from a wider pool of Scottish investors from which to draw information from the residential sector.
“Investors need robust, long-term performance data and the HFS report says that at the moment that just isn’t there for Scotland in any meaningful way,” said James. “The IPD launched its residential investment index last year but it faces a real challenge in getting enough Scottish landlords and agents to consistently provide it with information.
“Major investors like Royal London saying they’re interested in the sector will undoubtedly help, but there needs to be a concerted effort to produce quality data which stands a chance of encouraging other investors to follow suit. Residential property can provide a stable long-term asset, but, as HFS has pointed out, there’s still a lot to do if we’re to convince the big institutions to get involved.”
James also said a lack of mandatory professional standards had created “inconsistencies in the quality of property management practice across the sector”.
She said: “Legislation governing property managers has recently been updated, but a mandatory code of practice would help to drive up standards and improve professionalism. Wider co-operation across the smaller players might also introduce economies of scale which would help to reduce costs.”
According to the Scottish Government, 465,000 new homes are needed by 2035, and HFS last year asked the London School of Economics and Cambridge Centre for Housing & Planning Research to examine ways of boosting construction.