Prudential eyes deal to take on rented homes

Michael Bow
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BRITAIN’S biggest insurer Prudential is set to reverse more than half a century of investor habits this week as it closes in on a deal to buy hundreds of privately rented homes in London and the south east.

Prudential Property Investment Management (Prupim), as the insurer’s real estate fund arm is known, is close to inking a deal to take on a 555-house portfolio from Berkeley Group, valuing the properties at around £140m.

The deal, which could be announced as early as this week, would be a reversal of the mass withdrawal of insurers and other institutional investors from owning rented houses, which had been the dominant trend in the early 20th century.

Berkeley Group, the UK’s biggest housebuilder, established the private rental fund portfolio with backing from the Homes and Communities Agency in 2010, as part of a broader state-backed initiative to increase the supply of affordable rented housing.

Turning over the portfolio to Prupim would allow the asset manager to build its presence in the rented sector, which has long been neglected by institutional investors.

Before the introduction of onerous rent controls in 1954, institutional investors commanded a strong foothold in the private rented sector.

Close to half of all houses in the UK were rented out by investors in 1939 but by 1991 privately rented houses had fallen to just nine per cent as home ownership soared.