Research reveals latent opportunity for institutional investment in Shared Ownership assets

Type News

Date 13/03/2019

Avison Young has launched new research today identifying the opportunity for an increase in investment in Shared Ownership, a small part of the housing market which has grown substantially over the last decade, as a response to the affordability crisis, most prominently seen in London and the South East.

As average home deposits have climbed to a mean average of almost £45k, the decline in affordability across the UK has led to a substantial reduction in homeownership especially amongst millennials, with those aged 25-35 seeing ownership fall from 55% in 2008 to 38% in 2018. Shared Ownership has been one of a number of low cost home ownership solutions, and has grown due to its ability to create a level of affordability not catered for by the open market.

Despite an increase in overall delivery of low cost homes, there is limited supply against a strong demand. Whilst there has been a significant policy drive to greatly expand supply of Shared Ownership homes, greater involvement from institutional capital is starting to be seen.

Shared Ownership has typically been owned and managed by Housing Associations. However, greater support from central government, through grant funding and enabling reforms for private investment, has unlocked the shared ownership market for institutional investors to become actively involved., Investment demand for the product is likely to be driven by the low volatility, long-term index-linked rental income stream and exposure to house prices inflation through staircasing mechanism.

The report also highlights that the tenure also enables investment with a social purpose, with the structure of shared ownership positively impacting wellbeing as it offers flexibility and a secure tenure that is not offered by private rent.

Richard Stonehouse, Principal, Head of Residential Investment at Avison Young said: “Shared Ownership has not been given enough air time as an asset class. This has generally been attributed to the perceived complexity and limited supply of the product. As more savvy investors become switched onto the benefits of investment, the increased liquidity in the market will create greater transparency, and those investors who are being given good advice will increasingly benefit.”

Burak Varisli, Director at Avison Young, said: “An increasing number of private and institutional investors have deployed considerable capital in Shared Ownership through innovative business and funding models. These have helped accelerate the delivery of homes across the country. Looking to the future, we believe that the asset class will gain even more momentum as more investors seek access points for meaningful opportunities. The UK’s affordable homes shortage is a well-known fact and does not require debate. Shared Ownership is a key product with the potential to not only have a major commercial impact, but also provide social value to communities.”

You can view our latest research report "Shared Ownership - The case for investment" here.