The housing market is ever-evolving, responding to demographic shifts, economic trends, and societal needs. In recent years, we’ve seen a surge in alternative residential options, catering to specific segments of the population and addressing the shortcomings of traditional housing. From Purpose-Built Student Accommodation (PBSA) to retirement living, co-living, and shared ownership, these sub-sectors are reshaping the real estate landscape.
To further explore the challenges and opportunities of the alternative residential space, we brought together OakNorth experts Amelia Morton, Associate Director of Debt Finance, and Greg Manson, Director of Debt Finance, alongside guest panellists Sebastian Verity, Head of Residential Research at Allsop and Jonathan Lacey, Head of Acquisitions at Watkin Jones, in our latest webinar.
Here’s a recap of the insightful discussion…
Market overview
In the wake of economic fluctuations and demographic changes, the housing market has demonstrated resilience, bouncing back from lows and showing signs of upward movement. However, challenges persist, particularly in the rental sector. Rental prices have surged nationally, with London and Scotland experiencing significant year-on-year increases. This trend underscores the pressing need for innovative solutions to address the widening gap between supply and demand.
Outlook by sub-sector
1. Purpose-Built Student Accommodation (PBSA):
PBSA has emerged as a critical segment within the alternative residential market, driven by the growing student population and the need for quality housing. With universities forecasting increased enrolment numbers, the demand for student beds continues to soar. However, challenges such as outdated infrastructure and insufficient supply pose significant hurdles. Renewal programs and strategic investments are essential to meet the evolving needs of students and ensure sustainable growth in this sector.
2. Retirement living:
As the population ages, the demand for retirement living options is on the rise. Despite a substantial elderly population, the supply of specialist dwellings remains inadequate. Developers and investors are increasingly focusing on this segment, recognising its potential for growth. However, stigma and family-related concerns hinder widespread adoption. Overcoming these barriers and offering attractive solutions tailored to the needs of seniors are key to unlocking the full potential of the retirement living market.
3. Co-living:
Co-living presents an innovative approach to communal living, catering to urban dwellers seeking convenience and a sense of community. While the concept has gained traction, especially among young professionals and students, challenges such as regulatory uncertainty and location suitability persist. Successful co-living ventures require meticulous planning, strategic partnerships, and a deep understanding of market dynamics to thrive in diverse urban landscapes.
4. Shared ownership:
Shared ownership offers a pathway to homeownership for individuals facing affordability constraints in the traditional housing market. Despite its potential to address housing affordability issues, transparency and data limitations pose significant challenges. Enhancing transparency and streamlining regulatory frameworks are essential to foster confidence among stakeholders and drive sustainable growth in shared ownership initiatives.
Summary
Investors, developers, and lenders alike are recognising the immense potential of alternative residential sub-sectors. Forward-thinking strategies, informed decision-making and innovative solutions are crucial to unlocking opportunities and driving meaningful impact in the alternative residential market.
At OakNorth, we remain committed to supporting pioneering projects and empowering our customers to navigate the complexities of the real estate landscape. With a keen eye on emerging trends and a deep understanding of market dynamics, we stand ready to partner with property developers and investors in realising their ambitions.
Thank you again to Seb and Jonathan for joining Amelia and Greg in sharing your expert insights.
If you’d like to watch the full discussion, you’ll find the webinar recording here. Or, you’re interested in learning more, please get in touch with our team of experts to discuss your funding needs.
