Rationale for investing in living sector as investors see it:

• Worth 8x more than commercial (see diagram)
• Rent growth correlated with wage growth = inflation linked income
• Demand outstrips supply
• Esg opportunities

Who is investing / how

• Full spectrum, in particular Insurance companies in particular investing in long term projects eg btr (echos capital strategy workshop insights)
• More equity, less debt
• Cannot sell mixed portfolios eg retirement plus normal prs, though panellists thought that in time the sector will come together so that mixed living portfolios can be sold together

What strategies work?

• btr: still tiny compared to market, 70k units in Uk completed
• Affordable: Affordable housing regulated = moat around existing players. 68 for profit registered affordable housing providers. Registration takes 2-3 years. Those already there have significant advantage. Inflation linked income.
• Student
• Retirement
• Sfr: however the panellists still targeting mid teen IRRs. Everyone still saw this as most challenging sub sector due to complexity of retrofit.

How to underwrite rental growth

• people don’t do it in a way that is sophisticated as it should be (but they didn’t actually explain how it should be done, they just said cpi link was too simple)

Strategies that work