An investment opportunity is being launched to provide both institutional and direct investors with a low-risk route into the residential property sector in the UK.

The Investors in Housing Fund will initially target the London residential property sector, a proven asset class that has outperformed commercial property, equities and gilts over the past 30 years.

It is the latest venture from Mill Group, a property investment company with close to GBP1bn of assets currently under management in the UK.
 
Using the new co-investment model for home ownership, the investment will enable potential home owners to buy a share of between 25 per cent and 50 per cent of a residential property with the investors buying the rest.

David Toplas, chief executive of Mill Group, says: “The Investors in Housing Fund will provide access for both direct and institutional investors into the UK residential property sector with the superior co-investment model without the associated issues that buy-to-let models accrue. We project a running yield of six per cent p.a. as part of a projected return of 15 per cent IRR over a five year period on an ungeared basis after all fees and all at a low risk level.”
 
For investors, the fund aims to remove much of the historic risks associated with the residential sector; there should be no void periods once the co-investment is arranged, and repairs and other running and occupation costs can reasonably be passed to the occupier in full. There is a mutual interest in improvements to the property and both the owner and fund investors share capital growth.
 
The opportunity exists for co-equity investment into a UK residential housing joint venture which can at a later stage be rolled out across the Middle East.
 
Yolande Barnes, head of Savills research department, who has advised the fund, says: “This has the potential to be a more significant development in private housing finance than the buy-to-let mortgage.”