Build-to-rent (BTR) is an exciting segment of the buy-to-let sector. What’s behind its rise and where are the most popular build-to-rent locations in the UK?
The BTR sector is somewhat unique, in that it provides accommodation specifically designed for tenants rather than homeowners.
In the UK, while homeownership is still the ultimate goal for many, there has been a distinct shift towards people renting for longer than ever. This actually mirrors behaviours in many other countries, particularly the US, Germany and the Netherlands, where less focus is placed on owning bricks and mortar and people are more keen to live in high-quality rental homes instead.
But this country is catching up, and a survey from Manor Interiors shows how this modern market is picking up pace since the pandemic. Between Q3 2020 and Q3 2021, the number of BTR homes coming to market grew by 26%. In numbers, there were 63,950 completions, up from 50,798 last year.
BTR properties under construction
While the number of purpose-built properties being consturcted appeared to dwindle slightly during the pandemic, the number of developments in planning or under construction now shows distinct optimism.
According to the report, there was an 8% increase between 2020 and 2021 of developments in the construction stage. In the planning stage, there was a rise of 10%, from 90,412 to 99,543. The figures show just how huge the sector will be once the unbuilt developments are completed in the years to come.
Chief executive of Manor Interiors, Farhan Malik, says: “The rise of this sector has been astonishing. Developers and tenants alike have taken to the sector with an eagerness rarely seen. For tenants, it represents a step up from the traditional rental market with higher quality homes, more freedom, focused around the community and amenities that modern tenants want and expect.
“As such, they’re willing to pay more rent than they would for a traditional private rental home. That’s why, for developers, build-to-rent represents an entirely new avenue of revenue generation, with higher rental values and longer tenancies with much lower levels of turnover.”
The benefits of purpose-built residential property for investors and tenants
As mentioned above, from a tenant’s perspective, the sector often has more to offer than buy-to-let. Today’s tenants expect more than ever from their rental homes, particularly as renters are ageing. BTR properties create a sense of community as everyone in the block is renting, with shared spaces and amenities encouraging socialising. Many come with added extras, such as a concierge, workspaces, gyms and more.
Rents in these apartments tend to be higher because of the higher standard of living that comes with it. According to Manor Interiors, the rent can be 5.2% more, with an average BTR flat costing £1,323 per month compared to £1,258 per month.
Because tenants are choosing a more premium option for their accommodation, they also tend to stay put for longer. Some developments offer longer tenancy agreements, which provides more stability for the investor as well as the tenant. It also minimises void periods where rents are lost.
Build to Rent accomodation available in the capital city and beyond
While there have been shifts in where today’s renters want to live, cities will always draw huge numbers of young professionals. The likes of Manchester, Birmingham and Liverpool in particular have seen an increase in the number of people moving from London in search of a different situation. For many, flats rather than houses will be the preference in city centres.
Manor Interiors has listed the areas in the UK where there are the biggest proportion of properties, and flats specifically, on the rental market. In top place is Edinburgh, where of the 562 total rental properties, 505 (90%) are flats. In Glasgow, 89% of all rental homes are flats. Further down the list, but still with a generous amount of flats on offer, are Newcastle (79%), Manchester (73%), Sheffield (68%) and Nottingham (66%).
Farhan Malik says: “Flat living is the clear choice for many city-dwellers and a high propensity for renting apartments means many of our major cities are already primed and ready for the revolution.
“BTR developments offer a step above the standards of your typical private rental flat, a step up in sophistication and quality and, perhaps most of all, a superior tenant experience. We expect the sector to continue to establish a strong foothold as it has already done in London in particular, and developers can be confident that demand will be high.”
Here at BuyAssocation, we work with leading developers to source high-quality build-to-rent opportunities for our community of investors. Contact us for help acquiring your BTR property.