White paper On the rise

The rental housing sector has been experiencing global growth for years, accelerated by the COVID-19 pandemic. The increasing occupier demand and the steady nature of residential rental income are some key drivers for this trend. This growth has also been expanding in most local property markets, with emerging residential markets growing more rapidly than established ones.

The increase in occupier demand has been boosted by socio-demographic trends many countries are experiencing despite aging societies. Another factor contributing to the rise of the residential sector stems from internal migration trends, offering good ground for geographically focused investment strategies. The shift from the owner-occupied housing market towards the rental sector has been supported by further drivers, such as a lower affordability of housing, and the need for flexibility expressed by an increasingly mobile society.

Most local markets globally have not seen a dynamic rental housing supply development so far. A possible reason might be the more restricted third-party financing practices post GFC and the scarce availability of building plots in highly demanded urban areas. Moreover, the long-lasting supply change disturbances have led to elevated construction prices. And the war in Ukraine has triggered additional inflationary consequences which are possibly going to further slow down the global production of residential units in the short run.

Data shows residential income trends to offer strong inflation protection when compared with commercial market average. Another perk of residential assets are the usually higher risk-adjusted total returns compared to the overall local property sector. Globally, the rental residential market offers a variety of investment opportunities.

Next to market size and liquidity, other important factors in differentiating between institutionalized and frontier markets are the professionalization level of the residential value chain, the ownership structure of the rental housing stock, and the type of actors driving the local transaction market. Another consequence of the growth of global rental residential is the accelerating rise of niche fields within the sector, such as purpose-built student accommodations and the senior housing sector.

The growth of the global rental residential markets offers many opportunities for investors, where local expertise is key to succeed in these promising, but granular sectors.