The build-to-rent sector continues to expand across the UK, filling some of the gap between supply and demand within the country’s private rented sector.
The number of consented planning applications for build-to-rent developments surged over the past year, according to the latest figures from the British Property Federation, which recorded a 35% rise in the number of approved prospective projects.
The increase was particularly high in the final quarter of last year, indicating an acceleration in the sector that is set to continue into 2025. According to BPF’s research, there are now 112,511 build-to-rent homes in planning, with 59,043 under construction and 92,140 complete.
London continues to lead the way for the sector, reflecting the capital city’s huge rental demand alongside its desirability from an investment perspective. In total, there are 104,205 homes at varying stages of progress in London, while there are 159,498 spread across the rest of the country.
Elsewhere, both Birmingham and Manchester are particularly active in the space, with Manchester having a greater number of projects already up and running for the large numbers of tenants living in the city.
Meanwhile, the West Midlands – led by Birmingham – recorded the highest number of new consents during 2024, with 4,038 granted planning permission across the region, 3,700 of which were in Birmingham. This rapid expansion across the UK’s ‘second cities’ demonstrates the strength of projected future tenant demand in these areas, making them both a strong property investment prospect.
Construction challenges
While the increase in planning consents is a positive pattern for the build-to-rent sector, and for the private rented market in general, it also coincides with a fall in construction output, according to research from Savills.
Over the course of 2024, Savills found that the number of new homes under construction fell, with an 18% drop since 12 months prior. Completions have been outpacing the number of housing starts, with a 10,900 home gap between completions and new project starts during the year.
While London has seen the most growth in build-to-rent planning consents, it has also seen the most marked slowdown in construction, with a 22% fall during 2024. Elsewhere in the UK’s regions, construction fell at a slightly slower pace of 16%.
However, according to the British Property Federation, there are “encouraging signs that the pre-commencement pipeline is starting to be replenished, with a marked increase in the number of planning consents granted in Q4 2024”.
Ian Fletcher, Director of Policy, British Property Federation, said: “Despite the continuing decline in the number of starts on sites and overall completions of new build-to-rent accommodation, there are some tentative green shoots that the planning pipeline is improving.
“This positions the build-to-rent sector quite well for when the development market once again picks up and is potentially an early sign at investor and developer confidence is slowly starting to return, especially within London.”
He added: “In the context of challenging delivery figures for housing overall, BtR has an increasingly important role to play in rapidly converting consents to homes as it is not reliant upon future sales absorption. Investor appetite for BtR remains strong and that is certainly something which the government needs to carefully consider in the context of its forthcoming housing strategy.”
What about the UK rental sector?
The increase in investor confidence and developer appetite for build-to-rent reflects the strength of the private rented sector in terms of high tenant demand. There remains a gap – which is significant in some locations – between supply and demand, meaning a positive outlook for many of the property investors and landlords who remain.
Targeting a location with a strong pipeline of upcoming regeneration, high tenant demand, and proximity to employers, public transport and amenities, can be one of the best strategies for finding a property investment that can generate strong returns.
Property type and target tenant are also important. The rise in the build-to-rent sector, which offers purpose-built rental homes often with added amenities and a higher standard of living, can be an indicator of what today’s tenants are increasingly seeking.
This also coincides with rising energy standards in the private rented sector, with the government expected to tighten up regulations in the coming years. Newly built properties, including build-to-rent homes, are likely to provide higher than average energy efficiency credentials, which is becoming increasingly sought after by tenants.
If you’re looking for your next property investment opportunity in one of the UK’s most lucrative locations, get in touch with BuyAssociation today to find out more about our current and upcoming projects.
