Savills highlights ‘significant future opportunity’ for new entrants to invest in shared ownership

Savills’ claims about shared ownership came after the report revealed that the number of shared ownership homes in England has passed the 250,000 mark for the first time (252,220) and shared ownership sales have added a total of £6.5bn to housing associations’ turnover in the past decade.

This turnover was from first tranche sales and staircasing and includes £740m in capital receipts from shared ownership sales in 2023, the joint record highest along with the previous year.

Steve Partridge, director at Savills Affordable Housing Consultancy, said: “There is understandably a growing appetite from housing associations to sell existing shared ownership stock to release capital for investment.

“Against a backdrop of a steady pool of around 250,000 homes in ownership, this represents a significant future opportunity for new entrants to invest at scale in this stabilised shared ownership market.

“Based on average annual Help to Buy transactions when that policy was in operation (37,000 buyers per year), there is a greater capacity for shared ownership homes as part of the housing market and the solution to solving the housing crisis.”

‘Increasing pool of new entrants’

Savills said that, to date, private investment in the tenure has been concentrated among a small number of active players focused on buying new homes.

However, there is “an increasing pool of new entrants”, including pension funds looking at the tenure, the consultancy said.

“To date, sales of existing stabilised SO [shared ownership] portfolios have been concentrated to a handful of buyers, with other investors acquiring stabilised SO as part of mixed tenure portfolios,” Savills said in the report.

“However, in addition to existing players who are keen to continue to raise capital, there is an increasing pool of new entrants including pension funds looking at the sector credentials to deliver lower and more stable returns with less sales risk and access to portfolios of scale.”

According to the 2024 Savills European living investor survey, there is interest from investors outside of the sector, with 39 per cent of investors targeting private investment in affordable housing over the next three years.

For-profits increase share of shared ownership

Savills said that while the overwhelming majority of shared ownership homes are owned by housing associations, for-profit registered providers (FPRPs) have “significantly” increased their share of shared ownership homes as more new entrants bringing new private capital have entered the sector.

“[Shared ownership] remains a key priority for FPRP, providing investors with a secure rental income and exposure to house price inflation through staircasing,” Savills said.

The property consultancy said that at present the current pool of experienced, scaled, institutionally backed for-profits with appetite to acquire stabilised shared ownership assets at scale is “relatively small”, but is expected to grow.

“Whilst sufficient to absorb current levels of stock presenting to market, structurally, the market requires further development to increase the pool of available capital to HAs seeking to release capital from asset sales,” Savills said.

“The market may develop in a number of ways including more funds establishing FPRP entities and HAs establishing FPRP entities as a route to access third-party capital off balance sheet.”