UK residential property leads returns, says IPD

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Better returns were generated last year from UK commercially held residential property compared to European or North American markets, property index provider IPD has said.

The conclusion is based on measuring 10 private rental markets globally worth over £100bn against the IPD Multinational Property index.

According to this method, residential returns in the UK were 14.8% last year, compared to 9.7% in the US, 8.3% in Germany, 0.6% in the Netherlands, and 7.4% in the Nordic markets.

Over the past five years, UK residential property has returned 11.2% annually on average. IPD said that strong returns amid a cyclical downturn had made residential returns better than commercial ones: “even during a downturn, people still need houses”.

The UK market of institutionally owned rental market is relatively small, IPD added, but it is growing because of the rising number of people renting amid an ongoing housing shortage, which are factors boosting returns. The number of households renting in the UK doubled to over four million in the past decade, according to government figures cited by IPD, with private renting overtaking social housing as the second largest source of housing by volume.

International investors have spotted an opportunity to create returns, amid government policy that has resulted in changes to capital gains tax rules, which now exempt institutions when they acquire portfolios of residential property to rent.

Jonathan Boyd
Editorial Director of Open Door Media Publishing Ltd, and Editor of InvestmentEurope. Jonathan has over two decades of media experience in Japan, Australia, Canada and the UK. Over the past 17 years he has been based in London writing about funds and investments. From editing the newsletter of the Swedish Chamber of Commerce in Japan in the 1990s he now focuses on Nordic markets for InvestmentEurope. Jonathan was awarded Editor of the Year at the Professional Publishers Association (PPA) Independent Publisher Awards 2017. Shortlisted for the same in 2016, he was also shortlisted in 2017 and 2015 for the broader PPA Awards category Editor of the Year (Business Media).

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