Investor confidence continues to improve thanks to falling borrowing costs and a strengthening housing market, with the build-to-rent space recording a stellar 2024.
The UK rental sector remains under huge levels of demand from tenants, as people continue to rent for longer than ever before getting onto the property ladder, while housing supply struggles to keep up with the need for homes.
This continues to push up rents, with recent figures from HM Land Registry have recently revealing that rental prices in the UK increased by 8.7% in the year to January 2025. At the same time, rental yields have also been on the rise, with landlords achieving average rental returns of 6.93% in figures from December.
Build-to-rent has been a growing niche within the UK private rented sector for several years, starting predominantly in London before expanding to the country’s other major towns and cities. Consisting of purpose-built blocks designed with tenants in mind, build-to-rent homes have been on the rise to plug the supply and demand gap within the sector.
The rise of build-to-rent
New research from Savills has revealed the extent of growth within the sector over the past year, which marked a record-breaking 12 months for the market. Investment hit the £5bn mark for the first time in 2024, surpassing the previous record of £4.8bn in 2022.
This included a “bumper” final quarter of the year when the highest number of deals were secured, with activity also supported by a “resurgence of investment from outside the UK”.
North American investors in particular have made a beeline for build-to-rent, investing £1bn of capital in Q4 alone.
Developers and housebuilders are also more keen than ever to get involved in the sector, with Savills noting that several – particularly those that are London-based – have restructured their businesses to include the sector, leading to a major delivery boost.
The figures point towards a boost in market sentiment, which Savills says appears to indicate that the “bottom of the market is behind us”: “If 2024 was the year real estate capital markets stabilised, then 2025 could be the springboard for recovery. A number of key milestones were reached in the second half of last year which has noticeably improved investor sentiment and built momentum.”
Is BTR becoming more affordable?
Another important movement within the sector is linked to prices. In general, due to the fact that build-to-rent tends to offer more of a ‘full package’ option to tenants, and sits at the higher end of the market in terms of quality, prices tend to be at the top end of local market rents.
However, Savills notes that now that the sector is becoming more established, the schemes that already exist have begun to trend towards mid-market price points, while the brand-new and higher quality schemes (by virtue of when they are being built) remain at the higher end.
As growth in the sector continues to boost supply, this is also likely to naturally begin to ease price pressure in terms of both investment costs and the cost to the tenant.
Savills writes: “New homes deliver improved choice and affordability beyond the immediate beneficiaries. The chain of moves initiated by new supply means that one new home, even an expensive one, can improve the housing circumstances of several households.
“For example, a household may have the finances and desire to move to a higher-quality home, but limited choice prevents this move. With the addition of a new build home for rent, this household will move and free up their previous home for another household to move up the ladder, and so on.”
Focus on Manchester
More than 19,000 build-to-rent homes have been delivered across Greater Manchester over the past decade, with 9,000 in the boroughs of Manchester and 8,000 in Salford, one of the fastest-growing places in the area.
The report notes that with this enhanced delivery of homes, a wider range of investors have entered the city, opening build-to-rent to a larger pool of tenants as costs have reduced due to properties being offered across a wider range of price points.
“In 2024, the average advertised rent (1 & 2 beds) at the least expensive BTR scheme was £825 pcm compared to £1,912 at the most expensive.,” says Savills. “The range between the least and most expensive scheme was £1,087 pcm. BTR therefore spans a much greater proportion of Manchester’s rental market than in any of the past eight years (2017–2024).”
The build-to-rent sector has also been an important source of regeneration over recent years in Manchester, as well as across other major cities including Leeds. The developments are often built on brownfield land, where multi-phase, long-term plans are in place to create new neighbourhoods and reinvigorate communities, boosting the appeal of these areas for tenants and investors.
When comparing delivery of build-to-rent between London and elsewhere, a total of 88% of investment in the sector was targeted at markets outside London in 2024, which is the highest level on record.
