build-to-rent stamp duty

2012-2022: A decade on, build-to-rent is booming

Ten years since build-to-rent began to take off in the UK, its proliferation has done much to increase supply in the rental sector – and much more is still to come.

The latest research by the British Property Federation (BPF) of the country’s build-to-rent sector paints a picture that many experts had foreseen several years ago – a sector that has gone from niche to increasingly mainstream with significant growth across the board.

Its analysis of the market up to the end of the second quarter 2022 shows a 13% rise in the total number of build-to-rent properties either completed, under construction or in planning – to 237,000. 

While the seeds of the sector were sown in London, it has increasingly spread to towns and cities across the country, with record numbers of local authorities (45%) now having build-to-rent developments in the pipeline.

Ian Fletcher, director of real estate policy, at the BPF says the space has become a “nationwide phenomenon” since its inception in 2012.

Fastest-growing sub-sector

As a sub-sector of the private rented sector, build-to-rent has attracted huge amounts of interest from developers and investors in recent years. Largely, this has been driven by the changing needs and wants of today’s tenants, as their demographic has shifted.

Thriving locations, good local amenities and access to jobs, services and infrastructure are all key components of today’s build-to-rent developments, says the BPF, along with green spaces, walking and cycling infrastructure and access to transport.

For investors, says the federation, the neighbourhoods around such developments are often linked to investment gains, with a link to maintaining occupancy through additional redevelopment.

The new data shows that it is the fastest-growing sub-sector over the past 12 months, showing a 44% increase in the number of homes in the pipeline up to 21,000. 

Breaking it down, there’s been a 16% rise in completed units to 73,739, a 13% rise in units under construction to 47,764, and a 10% rise in units in planning to 115,859. The sector, therefore, shows no signs of slowing.

Build-to-rent tackling housing supply

In 2015, says the report, just 25% of local authorities included build-to-rent in their future housing supply plans. This increased to 37% in 2021, and 45% in this report. 

Regional cities have seen the biggest gains, with a 16% year-on-year increase in homes completed or underway. In London, which already has by far the most units, this figure was 8%.

Ian Fletcher says: “Our analysis for the second quarter of the year further underlines just how rapidly the UK build-to-rent sector is expanding.

“We can see a broader spread and increased presence of BTR across the country, with more local authorities including it in Local Plans and considering it a vital component of future housing supply. 

“This shows the market maturing beyond London and major regional city centres to towns and suburban locations and BTR becoming very much part of a more diverse and futureproof UK housing market.”

Investing in the sector

Institutional investors are increasingly looking to build-to-rent as a way of diversifying their assets into a growing sector. 

For smaller investors and landlords, buying a property that is specifically designed to be rented out has a number of benefits. They often offer longer tenancies, reducing void periods, while obviously having the added attraction of the amenities for tenants.

The build-to-rent model tends to include communal facilities such as resident lounges, gyms and social activities, as well as work spaces – which of course is a major highlight since the pandemic.

Jacqui Daly, director of residential investment research at Savills, adds: “We continue to see strong demand for build-to-rent from investors, who are paying competitively for stock against deep occupier demand in a chronically undersupplied private rented sector.

“The opportunity for developers and investors in single-family build-to-rent is being increasingly widely recognised, with this the fastest growing sub-sector over the past year, with a 44% uplift in the number of homes in the pipeline.

“At the same time, housebuilders are also increasingly looking at single family build-to-rent as an exit, particularly given the looming end of Help to Buy, which itself looks set to boost demand for private rented homes.”

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