The Fund has been initiated by specialist property investment company, Mill Group, to provide institutions with a low-risk route to invest in the residential property sector.
Through a process of “co-investment” between the Fund and consumers, it will give house buyers access to the capital needed to purchase the home they want in London or the south east.
Chair of the Committee representing the Newham Pension Fund, Cllr Alec Kellaway, said: “This is an exciting new fund that will focus on revitalising housing in London and the South East using a new form of property tenure.
“Whilst the new fund delivers a good investment case, we believe that it is appropriate for public sector pension funds to support new initiatives that will enhance people’s lives and local communities. We hope that other local authorities will join us in this new fund.”
The Fund is set for a Q1 2011 launch, initially in the capital and the South East, where buyers face considerable difficulties raising the capital sufficient for house deposits, stamp duty, and consultant fees.
David Toplas, CEO of Mill Group, said: “Once again, Newham has demonstrated a willingness to explore innovative, alternative assets as a route to delivering good returns but also benefiting local communities.
“We are confident that the fund will allow a large number of people who are trapped in the private rental sector – a sector whose supply can no longer support consumer demand – or are still at home with their parents, and allow them to become home owners.”
The Fund will provide investors with superior indexed income returns and capital gains from UK housing, a proven asset class that has outperformed commercial property, equities and gilts over the past 30 years.
The inability to finance the high deposit now required is a key barrier to entry for mainstream buyers. Co-investment is a new model for home ownership where the buyer acquires a share of between 25 and 50% of the property with the Fund buying the rest.
This overcomes the barrier by enabling the buyer to use the deposit cash that they can access to provide the Loan to Value required by mortgage lenders on the share they buy. They will also be paying a continuing investment fee on the part that they do not own. The owner can increase the percentage of the property owned at any time.
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