Buyers of private rented sector apartments are not factoring in the potential implications of political change in the U.K., according to a leading private equity investor.

Apollo Global Management Head of European Real Estate Roger Orf told delegates at Bisnow’s Follow The Money capital markets event that a change of government is more likely than many investors in PRS and build-to-rent residential were anticipating, and it would have a big knock-on for the sector.

“A party led by Jeremy Corbyn in government is an existential risk in my opinion, and there are a lot of risks associated with that,” he said. “I don’t think people are thinking about that when they are buying PRS at a 3% yield. What will happen to your returns when you have rent controls? When you overlay that with the prospect of interest rates going up it is pretty scary.”

In a report on the sector earlier this month, analysts at Green Street said better returns are available from student accommodation rather than PRS for both investors and developers in London. Ungeared returns for investors are 6% from student accommodation versus around 4.5% from PRS.

Orf, a major donor to the Conservative party, said he could see a scenario where there is a change of government in the U.K.

“Theresa May will ask for an extension to the 19 March [2019] deadline for Brexit, there will be a lot of pushback from her party and if there is a leadership election she won’t win. It is a big political mess. If Jeremy Corbyn gets in then private equity and capitalist businesses have a lot to worry about.”

There was a feeling among the speakers that the BTR and PRS sectors were not doing much to make housing in London more affordable. Responding to a question from Cluttons Head of Research Faisal Durrani on affordability, Benson Elliot Managing Partner Trish Barrigan pointed to data from the apartment leasing market.

“If you look on Zoopla at apartments to rent for £1,250 a month in London there are 9,000,” she said. “Then for every increase of £250 there are 9,000 more. We are not building enough apartments that are affordable.”