LONDON, UK, May 16, 2009 /24-7PressRelease/ -- Property Portfolio Manager, Young Group, warns that a lack of robust residential asset management expertise is set to hamper efforts to boost the scale of institutional investment in the Private Rented Sector (PRS).
Whilst welcoming the Homes and Communities Agency's (HCA) Private Rented Sector Initiative (PRSI) to facilitate greater institutional investment and applauding the steps proposed to support greater entry into the market, Neil Young, Young Group's CEO, is concerned that there is a lack of appropriate expertise in managing portfolios of residential property assets.
"Arguably, the UK has one of the world's most highly developed asset management markets. However, almost all of that experience is skewed towards the commercial sector." points out Young.
"A commercial asset management approach cannot simply be applied to residential property; they are completely different asset classes. One of the greatest hurdles to growing institutional involvement in the PRS is in managing the large portfolios of residential assets appropriately."
As an asset class, residential property is management intensive and the sector has traditionally focused upon delivering property management to individual owners or landlords with small fragmented portfolios.
Young maintains, "Our proven experience in providing residential asset management as an integral part of Young Group's portfolio consultancy has taken years to cultivate and remains scarce in the industry.
"A new wave of asset managers is required that understands the commerciality of residential property, can actively drive income generation and operate at a larger scale, generating economies that can be factored into asset management costs and returns."
For residential investment to be an attractive proposition to institutions, residential asset managers must step up and offer a robust and cost effective service. The onus is upon them to provide a coherent strategy to support institutions in acquiring, holding and ultimately disposing of residential property and in driving income generation from assets that are held.
Residential Property is Management Intensive in Nature:
• Increased uncertainty of income compared to commercial leases from shorter tenancies and softer covenants.
• Commonly let on assured shorthold tenancies which limit tenants obligations to repair and insure the assets, whereas commercial lets are full repairing and insuring leases.
• Increased tax burden. There's an inability to claim VAT on the cost of repairs and purchases are liable to Stamp Duty Land Tax (SDLT).
• Residential holdings tend to be fragmented. Tenants can be spread across numerous developments and locations.
• Average lot size of residential property is a fraction of that for commercial making economies of scale harder to generate.
• Fund Manager experience is focused upon commercial property rather than residential. Outsourcing tends to be to managing agents providing reactive property management rather than to asset managers who can drive income generation and maximisation.
About Young Group
Young Group specialises in providing Property Portfolio Management services to private investors, identifying the best off-plan opportunities in London on their behalf and managing the entire investment process - from sourcing the property through to financing, furnishing and letting.
Young Group is a wealth manager with a focus on property as an asset class. Young Group owns all the property it sells, and also retains a number of properties for its own portfolio. As the principal in every transaction, Young Group does not realise any profits until completion, giving investors 100% confidence that properties will 'value up' and that financing will be secured.
Young Group has transacted in excess of 1,500 apartments, with a retail value of GBP630m. The majority of our units are bought by clients for their private portfolios. The Group's lettings division, Young Lettings, has successfully let all investors' apartments within a week of completion.
For each property exchange, Young Group donates GBP50 to Children with Leukaemia, the UK's leading charity dedicated exclusively to fighting Britain's biggest childhood cancer through pioneering research, new treatment and support of children with Leukaemia and their families, and to Norwood, the Children and Families First charity which provides support to families facing social difficulties.
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