build-to-rent landlords build to rent

Greater investment coming to the build-to-rent market in 2023

A consistent level of rental market growth across the UK has boosted prospects within the build-to-rent field, with 8,300 homes brought to market so far this year. 

The UK’s rental sector has been facing an ongoing imbalance between available stock and demand, with the number of tenants seeking homes far outweighing the number of properties available to let in some areas.

While this has had the effect of pushing up rental prices, it has also led to a rise in the number of tenants seeking a more long-term accommodation option, with more of a focus on quality and amenities. As a result, build-to-rent has risen in popularity among both tenants and investors.

The latest research from Savills on the sector has found that investment activity within build-to-rent improved during Q2 of this year, to a record high of £1.26bn. The sector is also taking a growing share of new rental housing delivery, says Savills, and this is expected to increase further as more investors enter the fold.

While build-to-rent properties still make up less than 1% of privately rented homes in the UK, as the sector grows, it is hoped that it could begin to plug some of the supply-demand gap across buy-to-let as a whole.

More supply from build-to-rent

The market share of new home sales is also being made up by a growing number of build-to-rent investment, according to Savills. In the first quarter of the year, the sector made up around half of new housing sales in London.

As Savills notes: “Alongside supporting construction, the case for investing into existing operational assets is compelling. We have also reached a point where the early movers in the first wave of BtR development in London have come to the end of their business plans and are looking to crystallise their gains.

“Assets in London represent a unique proposition, given Multifamily makes up less than 1% of privately rented homes in the capital. With new supply inevitable, there is a window of liquidity before the next wave of capital enters the market.”

London isn’t the only place where build-to-rent is booming, though, despite the fact that the majority of properties in the sector are located there. Other major cities across the UK, including Manchester, Birmingham and Leeds, are seeing a significant increase in the number of projects being constructed.

The data shows that new starts in the sector rebounded in Q2 in the regions of the country away from the capital, with 3,157 in total during the period. This comes on the back of a “modest” Q1, while new starts in London were more subdued.

The benefits of investing

As the sector progresses, lessons are continuing to be learned by tracking operational data, enabling improvements to be continually made to improve what’s on offer, and boosting overall profits.

Savills points out that as rents across the country continue to rise, “tenants are becoming increasingly discerning”. Those developments that can offer superior facilities and levels of service will be the frontrunners when it comes to attracting tenants, generating the best returns for investors.

The half-year total for investment into the sector is now £2.1bn, with Q2 adding £1.26bn of investment to this figure. Total build-to-rent stock has now reached 88,100 completed homes, and there are currently 53,500 under construction, with 111,800 in the planning pipeline.

The report concludes: “In tougher economic conditions, delivery of individual houses offers diversification of investment strategy and unit-by-unit handovers meaning operations can often commence faster than larger apartment blocks which have longer delivery timescales.”

BuyAssociation works with developers across the UK, connecting investors to property investment opportunities within buy-to-let, build-to-rent and more. Get in touch for more information

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