Even though many investors have been shifting to the commercial sector in recent years, returns from residential investments are around a third higher than their commercial counterparts, according to a new report by Qatar Diar and Delancy.
The figures, which looked at a ten year period from 2002 to December 2012, saw that the residential field was offering up to 30 per cent higher returns than commercial properties, but this still was not high enough to sway investors towards the field.
If anything, the sector actually attracts very little investment, the report states. Even though the private rented sector had a value of £1 trillion two years ago, institutional investment was only £2 billion of properties. This equates to just 0.18 per cent of the market.
The report had been written by the International Centre for Housing and Urban Economics. Professor Michael Ball, of the Centre, said: “Both long-run trends and future predictions for private rental residential sectors show that, in the UK, there is a strong case for significant large scale investment to deliver attractive returns.”
This news comes after recent research by De Montfort University which highlighted that 23 per cent of commercial property debt to banks in the UK is in negative equity. The 2012 Commercial Property Lending Market report stated that banks now have £217 billion of debt secured in commercial property in the country, but 23 per cent of this (£45 billion) now has a loan-to-value (LTV) ratio of 110 per cent, meaning that borrowers are actually in negative equity.
Delancy and Qatar Diar are actually developing nearly 3,000 homes on where the Olympics Athletes' Village used to be. This will be one of the largest private rented schemes in the UK.