A tightening of lending criteria 鈥� coupled with increased stamp duty for buyers 鈥� could benefit institutions looking to enter the UK private-rented sector (PRS).
The Bank of England this week said it would monitor mortgages taken by buy-to-let landlords.
The bank said the UK鈥檚 buy-to-let mortgage market had continued to 鈥済row rapidly since the end of 2013鈥�, with the outstanding stock of buy-to-let mortgage lending increasing by almost 6% a year on average since 2008.
The results of its 2014 stress test, which featured a 35% fall in house prices and an increase in interest rates, indicate that, under such a scenario, UK banks would face significant increases in buy-to-let impairment charges.
The announcement by the UK鈥檚 central bank comes after UK chancellor of the Exchequer George Osborne last month unveiled plans to increase stamp duty for landlords.
From April next year, a 3% surcharge on each stamp duty band will apply.
Speaking at a recent event in London organised by LaSalle Investment Management, Mark Prisk MP, former housing minister, said it was now widely accepted that buy-to-let activity 鈥渃annibalises rather than adds to the private-rented sector鈥�.
The non-institutional buy-to-let investment market, he said, could be 鈥渟queezed鈥� by the government鈥檚 move, announced in its Autumn Statement last month.
Prisk, who advises Essential Living on strategy, said a credible alternative to becoming a landlord was needed for those looking for an investment opportunity with one eye on their retirement.
LaSalle鈥檚 UK residential fund manager Andrew Stanford said the company was aiming to have invested 拢500m (鈧�709m) in the sector by the end of next year and now had a visible pipeline of build-to-rent schemes.
The company, which this year invested 拢60m in a 292-unit build-to-rent scheme in Aberdeen, has hired Savills as property manager for its UK portfolio.
PRS was identified as a sector by the UK government as early as 2010.
In a report at the time, the UK Treasury said a strong 鈥渟upply-side response鈥� was needed to support the UK鈥檚 economic recovery.
PRS was judged to have a key role to play in how well the wider residential sector responded to changing demand.
While few deals have transacted, Stanford said there was now more evidence of engagement by institutional investors as other real estate sectors became over-priced and impenetrable.
Stanford 鈥� who, before joining LaSalle in April this year, was head of the UK government鈥檚 now disbanded PRS taskforce, added: 鈥淵es, we鈥檇 like to have seen more schemes coming out of the ground, and there was frustration with the planning process.
鈥淭he industry is supportive of the sector, but the biggest challenge now is winning the hearts and minds of council officials and the electorate.鈥�
Ian Fletcher, director of policy for real estate at the British Property Federation, agreed prospective investors, local council authorities and tenants were still in need of educating.
A 鈥渓ack of familiarity鈥� is, he said, the sub-sector鈥檚 biggest challenge.
Demographic trends are increasing demand for private-rented housing, according to Alan Tripp, UK managing director at LaSalle, with the sector becoming an increasingly significant part of institutional investors鈥� portfolios.
