Grainger: Property giant benefits from higher rents and small landlord exits
Property giant Grainger has reported double-digit growth in income driven by higher rents and the exit of private landlords from the rental market.
Grainger, the UK’s largest listed provider of private rental homes, told markets this morning that total net rental income grew by 15 per cent in the four months to the end of January.
Total like-for-like rental growth reached 4.7 per cent in the year, with occupancy at 96 per cent and average sales prices 0.5 per cent ahead of valuations.
Grainger has a £1.4bn pipeline of around 5,000 build-to-rent homes, supported by a “supportive regulatory backdrop”.
The UK Government has pledged to support homebuilders by reducing planning regulations and closing the construction skills gap, two areas which have long held back the industry.
Grainger added that the fundamentals of the UK residential rental market “remain exceptionally supportive”, as “demand continues to grow and rental supply continues to be constrained as small, private landlords face increasing headwinds”.
Landlords have been exiting the London market at high rates for multiple years.
Landlords used to be able to deduct the entirety of their mortgage interest costs when they paid taxes, but since 2020 have only been able to deduct 20 per cent.
When coupled with high mortgage rates, this means many private landlords’ yields have become unsustainably thin.
“We expect to deliver continued growth in strong, reliable, cash-backed earnings for years to come, and our conversion to a REIT [real estate investment trust] later this year marks Grainger’s transformation away from a trading business to a total returns focused investment business underpinned by reliable, recurring income,” Helen Gordon, Chief Executive of Grainger, said.
Grainger expects earnings to grow by 50 per cent in the medium term.