Real assets

Private Rented Sector: resilient income underpinned by demographics and urbanisation

  • Major cities are amongst the most prohibitively expensive places to live in the world and yet continued urbanisation is a trend that is expected to persist for the foreseeable future. A confluence of demographic factors including migration, population growth, delayed marriage and shrinking household size is driving rental demand.
  • This persistent growth in demand is being met with limited new supply leading to a supply – demand imbalance. While the resultant housing shortage varies market by market most major cities across the globe are suffering from a degree of a housing provision gap that is supporting strong rental value growth prospects for rented accommodation.
  • We acknowledge the desirability to own is unlikely to diminish, especially in those markets where it has been the traditional preference, but affordability is also unlikely to be remedied in the short run. With ownership rates stagnating in many markets, conditions support the case for developing institutional private rental sector (“PRS”) as households are increasingly forced to consider rental options and the current stock levels are insufficient.
  • From an investment perspective, we believe that the PRS sectors offer property investors with long-term and stable income streams with inflation linkages that are relatively swift to mark to market and underpinned by a granular tenant base. Operational efficiency and scale are key to enhancing net income, managing costs and producing sustainable long-term cash-flows, justifying the expensive entry yields.
  • Preferred market characteristics include but are not limited to: above trend historic and expected GDP growth, growth across population groups, higher ownership cost vs renting, a market friendly regulatory environment, diverse demand, low forecast construction levels and a liquid investment market.
  • Regulation is a key risk to PRS investment as political cycles can change the regulatory impact of rented accommodation overnight. We are confident that regulation should not be a reason to avoid a market; indeed, a scalable operating model, strong partnerships and a focus on place making can aim to generate sustainable long-term income even in a highly regulated market.

The information has been established on the basis of data, projections, forecasts, anticipations and hypotheses which are subjective. This analysis and conclusions are the expression of an opinion, based on available data at a specific date. Due to the subjective aspect of these analyses, the effective evolution of the economic variables and values of the financial markets could be significantly different from the projections, forecast, anticipations and hypotheses which are communicated in this Material, as defined in the notice at the beginning of the document. For illustrative purposes only.

Not intended to be investment advice and does not take into account the needs of the recipient. There can be no guarantee that any investment strategy presented will be implemented or ultimately be successful.

© 2019 AXA Real Estate Investment Managers and its affiliated entities.

This article shall not be deemed to constitute investment advice and/or tax, accounting, regulatory, legal or other advice and it should not be relied upon as the basis for a decision to enter into a transaction or as the basis for an investment decision. This article is for informational purposes only and does not constitute, on AXA IM’s part, an offer to buy or sell, solicitation or investment advice. The services are not being offered in the U.S. or to U.S. persons. The information set forth herein does not purport to be complete and is subject to change without notice. This article does not take into account the recipient’s objectives, financial situation or needs.
Analysis and conclusions express the views of AXA IM – Real Assets and may be subject to change without notice. All information, analysis and conclusions herein present AXA IM – Real Assets’ current knowledge and market estimation at the time of its production. Nevertheless it can come to unintended erroneous statements or presentations and the information may change at any time without previous announcements and/or notices to the recipient of this article. Thus, a liability or guarantee for the up-to-datedness, correctness and completeness of the allocated information, estimation and opinion cannot be assumed. Furthermore, due to the subjective nature of these analysis and opinions, these data, projections, forecasts, anticipations, hypothesis and/or opinions are not necessary used or followed by
AXA IM’s management teams or its affiliates, who may act based on their own opinions and as independent departments within AXA IM.
Any hypothetical illustrations, forecasts and estimates contained in this article are forward looking statements and are based upon assumptions. Hypothetical illustrations are only an estimate and AXA IM – Real Assets assumes no duty to update any forward looking statement. This article also contains historical market data; however, historical market trends are not reliable indicators of future market behaviour.
Although some information has been provided by AXA IM – Real Assets, the information is based on information furnished by third parties the accuracy and completeness of which has not been verified by AXA IM – Real Assets. While such sources are believed to be reliable and accurate, none of AXA IM – Real Assets or its respective affiliates, directors, officers, employees, partners, members or shareholders assumes any responsibility for the accuracy or completeness of such information.
Prospective investors must understand, investigate, evaluate and assume the risks of an investment. Certain risks cannot or may not be mitigated and are outside of a manager’s control.
There can be no guarantee that any investment strategy presented will be implemented or ultimately be successful.
AXA IM – Real Assets makes no representation or warranty (express or implied) of any nature nor is responsible or liable in any way with respect to the truthfulness, completeness or accuracy of any information, projection, representation or warranty (express or implied) in, or omission from, this information.
By accepting this information, the recipient of this document agrees that it will use the information only to evaluate its potential interest in the strategies described herein and for no other purpose and will not divulge any such information to any other party.

© 2019 AXA Real Estate Investment Managers and its Affiliated Companies. All rights reserved.