Real Estate Predictions 2021 - Understanding the Private Rented Sector property Solving the structural need for rented housing in the main ...
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Real Estate Predictions 2021 Understanding the Private Rented Sector property Solving the structural need for rented housing in the main capitals
Understanding the Private Rented Sector property | Real Estate Predictions 2021 2
Understanding the Private Rented Sector property | Real Estate Predictions 2021
One of the megatrends in real estate is the need for rented housing in the main
capitals. COVID-19 has accelerated this trend. The reasons behind the increased
demand are the rising population, the fall in the average number of people per
household, restrictions on financing combined with decreasing savings ratio and
changes in habits. However, there is an insufficient and inadequate stock of rental
housing, so a specifically designed product must be developed to match demand and
offer new real estate opportunities.
Housing is a fundamental right that is Graph 1. Population trend of the main cities and the EU-28 (Y-o-Y)
included in the constitution of the EU and
1.8%
in those of its member states. Over the
last few years, the demand in the rental 1.6%
market has increased dramatically, not only 1.4%
in Europe but also in the rest of the world. 1.2%
This is a result of population increases in
1.0%
the main urban areas and the rise in the
0.8%
number of households due to the decrease
in their average size. 0.6%
0.4%
Another contributing factor is the greater 0.2%
difficulty of access to the housing market 0.0%
due to financial restrictions and increasing 2016 2017 2018 2019
prices and changes in life habits, especially
among the new generations. EU-28 Berlin Madrid Milan London (greater city)
Source: Eurostat
As a consequence of the structural
lack of balance in supply and demand,
the PRS (Private Rented Sector) market Graph 2. Number of households variation (2009 =100)
is expanding. In particular, there is 115
an imbalance (shortfall) in social and
affordable housing. The market requires 110
new solutions to respond to these
urgent needs. There will be a significant 105
capital allocation to this asset class in the
coming years. 100
Megatrend: Household growth in main 95
capitals
By 2050, 70% of the world population will 90
be living in cities. The increasing demand 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
for housing in these cities will be driven by
three main factors: EU-28 Germany Spain
France Italy United Kingdom
1. the megatrend of population growth in
the main capitals (see graph 1), Source: Eurostat
2. a continuous household creation in the
main countries of the EU (see graph 2)
and,
3. a declining number of average persons
per household (see graph 3).
3Understanding the Private Rented Sector property | Real Estate Predictions 2021
This is triggering the need for additional Graph 3. Average household size of the main countries and the EU-28
housing units that are smaller in size and
adjusted to current needs. Spain 2.5
2.7
The trend towards rental 2.3
United Kingdom
2.4
Disposable income and effort rates are key
in the shift towards the PRS market, driven 2.3
Italy
by macroeconomic variables such as GDP 2.4
per capita, employment and the savings 2.1
France
rate. The increasing property prices in city 2.2
centers, as well as restrictions on financing,
Germany 2.0
mobility and changes in consumer habits 2.0
have structurally enhanced the rental
EU-28* 2.3
demand in Europe (see graphs 4 and 5). 2.4
Affordable housing: accelerated by 2019 2009
the crisis Source: Eurostat
The rental market across Europe is
concentrated around young and low-mid
income tenants. The global financial crisis Graph 4. % households renting in EU-28
has eroded economic growth, impacted
31 30.8 30.8
employment and led to containment in 30.7
salary growth, which has increased the
demand from these tenants. Salaries in 30.5
the EU countries rose with an average of
1.9% per year between 2014 and 2019,
30
while the price of housing rose by 3.8% on
average during the same period (see graph 29.5
29.4
6). This trend, combined with a decreasing 29.5
savings ratio, is shifting demand from
purchasing towards rental. The recession 29
and economic uncertainty caused by
the COVID-19 pandemic has accelerated
28.5
this trend.
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
“Build To Rent” as a need Source: Eurostat
The need to develop an adequate housing
stock that is specifically designed to meet
Graph 5. % households renting in EU (2019)
rental market demand needs has led
developers to use a significant portion of 60
their stock of land to “Build To Rent” (BTR). 48.9
Turnkey and forward purchase agreements 50
have become an emerging trend. In Spain
40 35.9 34.8
alone, the investment pipeline for rental 31.1 30.8
platforms exceeds 30,000 units. BTR will 27.6 26.1
30 23.8
continue to be a real estate trend through 41.1
19.5
2021 and beyond. 20 29.7 22.2 13.2
19.0
30.2 15.8
10
16.4
12.9
7.8 8.6 8.7 8.0
5.1 0.8
0
Germany France United Netherlands EU-28 Italy Portugal Spain
Kingdom
Rent at reduced price or free Rent at market price Total rent
Source: Eurostat
4Understanding the Private Rented Sector property | Real Estate Predictions 2021 Opportunities for investors PRS offers an attractive risk-return profile based on the yield premium compared to risk-free (at maximum levels in the present context of interest rates). It has proven to be a more resilient asset class in times of crisis, with a lower performance volatility due to granularity. In certain markets, limited institutional competition presents a clear opportunity for the development and consolidation of platforms. If BTR is going to be structural, the key for investors is to ensure the operational capabilities (end to end) for the successful execution of the investment strategy - sourcing, development and operation. Large investors, such as large investment managers, insurance companies and sovereign funds, are already taking advantage of key strategic markets, confirming the megatrend and converting PRS to the main asset class in the future. Authors Alberto Valls Partner | Real Estate | ES avalls@deloitte.es Contacts Joaquín Linares Partner | Real Estate | ES jlinares@deloitte.es Pedro Fuster Director | Real Estate | ES pfuster@deloitte.es 5
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms, and their related entities. DTTL (also referred to as “Deloitte Global”) and each of its member firms are legally separate and independent entities. DTTL does not provide services to clients. Please see www.deloitte.nl/about to learn more. Deloitte is a leading global provider of audit and assurance, consulting, financial advisory, risk advisory, tax and related services. Our network of member firms in more than 150 countries serves four out of five Fortune Global 500® companies. Learn how Deloitte’s approximately 264,000 people make an impact that matters at www.deloitte.nl. This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively, the “Deloitte network”) is, by means of this communication, rendering professional advice or services. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. No entity in the Deloitte network shall be responsible for any loss whatsoever sustained by any person who relies on this communication. © 2021 Deloitte The Netherlands Designed by CoRe Creative Services. RITM0582346
You can also read
