The build-to-rent sector has seen a marked increase in the numbers of properties under construction, and London’s statistics also show a sharp rise in demand.
The British Property Federation (BPF) has published the numbers of build-to-rent properties being planned, under construction and completed for Q4 in 2018. Their figures show that the number currently being built is 43,374, up by an impressive 39% on the same period in 2017. The total of build-to-rent properties in all three phases of the process is just under 140,000, having risen by 22% on a year earlier.
Regions lead way at the construction stage
When that national total is broken down, London’s build-to-rent construction sector accounts for 52%, following a period where the regions were leading the way over the capital. But the regions are some way ahead of London with build-to-rents that are at the building stage, with a shade over 24,000 being built outside of London compared to 19,000 within it. And for the first time, the amount of homes in the sector finished off around the country – 14,615 – has nearly caught up with London, being just under 200 short.
The data, compiled by Savills in conjunction with the BPF, also shows that 30% of build-to-rents completed in London took advantage of Permitted Development Rights (PDR), where existing buildings such as disused offices could be converted without planning permission. However, just 9% of the 38,000 build-to-rents in London being planned are being delivered through PDR, hinting that purpose-built developments are the order of the day.
“PDR was a policy designed in response to planning policy failure, where too many office buildings sat empty for far too long,” says Ian Fletcher, BPF’s Director of Real Estate Policy.
“Clearly for build-the-rent, PDR has supported kick-starting the sector’s growth, but its use has decreased, and this trend is likely to continue.”
Build-to-rent helping to meet a growing need
Build-to-rent helps the rental sector move with the times, where renting is an active lifestyle choice, particularly with young people, rather than an enforced ‘last resort’. The Office for National Statistics (ONS) recently published figures showing that there had been a 10% fall in the numbers of 22 to 29-year-olds owning property, while the Resolution Foundation claim that a third of young adults will never have their own home.
Renting offers flexibility and is less of a liability than home-owning, and build-to-rent developments offer amenities and locations that appeal to millennials. Often found in appealing urban locations with gyms, bars and restaurants nearby, they also tap into an increasing trend for graduates to stay in the area where they went to university by giving seamless transition from student accommodation that had similar facilities.
In Manchester, over two-thirds of students stay in the city after their courses come to an end, and it is also one of the places where it is cheaper to rent than to buy in monthly costs. Many people become used to living month-to-month, compared to the traditional notion of buying with an eye to the future, so investors who can provide good rental stock will be satisfying that need.
Jacqui Daly, director with Savills residential investment research and strategy, adds,
“It’s no surprise that permitted development accounts for such a large share of completed schemes because it has provided an easy springboard for build to rent.
“Investors need scale – ideally schemes of 250-plus units – and that’s generally impossible to achieve by converting an existing building. Changes to planning will make it much easier to get bespoke developments off the ground, which will match investor demand for sizeable portfolios offering long-term stable income streams.”
