“In my view, this is a very shortsighted attempt to retain office blocks, and a refusal to accept changing habits of shopping and work. They need to give up on a 1980s model that doesn’t work any more. “The Help to Buy scheme makes PDR even more compelling as it creates a ready market for these projects.”
Increase the supply
Of course, local authorities may be resistant to conversion as change of use to residential will reduce the rateable value of the land and they may wish to halt any erosion of this income. Habib believes PDR – “frankly the best planning policy I’ve seen in my career” – could be used effectively to generate institutional scale for residential property portfolios, including the very kind of stock that local authorities need for social housing.
However, the government needs to take greater steps to increase supply rather than focusing on stimulating demand. “The government should apply Help to Buy to small developers who can take taking advantage of PDR and really get things moving.” As more vehicles become available, it seems inevitable that pension funds will invest into this sector, but it won’t be an overnight hit, says Cordea Savill’s Patel.
“There is interest and a lot of bodies are trying to make it happen. Some are starting to invest, so that momentum will continue to grow.” He feels the industry is innovative whenbreaking down barriers of execution and scale and more money will go into residential, but it is starting from a very low threshold. “This may be 1% to 2% in time but will remain very small and in 10 to 15 years, this may be heading towards a mainstream asset class.”
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