build-to-rent modern regional cities

Regional cities see biggest boost in build-to-rent sector

The build-to-rent sector has seen a surge in construction activity in the UK’s regional cities, while growth levels are stunted in London.

Overall, the number of build-to-rent properties completed or in the pipeline in the UK has increased by 11% compared with this time last year, totalling 263,694 new homes in the sector. But it is the regional cities that have experienced a standout performance, according to the latest report from the British Property Federation.

Its research, in partnership with Savills, shows that regional cities saw a 16% year-on-year spike in the number of build-to-rent homes being built to Q3 2023, with 3,339 new starts. This compares with just 434 new starts in London in the third quarter, which is a year-on-year rise of 5%.

Why are regional cities seeing a surge?

When the sector first began to gain traction in the UK, it was predominantly concentrated in London, where tenant demand is particularly high. Build-to-rent also lends itself to relatively dense areas and high-rise buildings. Over time, more and more units have been built further afield, led by the likes of Manchester and Birmingham.

This has coincided with the wider rental markets of such places becoming stronger, with rents rising at the highest rate in Manchester than anywhere else in the country thanks to growing tenant demand. As a result, build-to-rent developers have honed in on these areas to fulfil this need.

As Ian Fletcher, policy director at British Property Federation, points out, there are also a number of external factors that have meant regional cities have made more headway than London over recent months in the sector.

“There is huge demand for purpose-designed homes for rent in London and major cities, but the sector is facing significant headwinds in terms of delivery. Uncertainty on inflation and where interest rates will peak is causing projects to stall, particularly in London where developments are typically higher-density and more complex.

“However, there are nearly 60,000 homes with a detailed planning application in the sector suggesting market activity could pick up quickly when conditions are right, but policymakers must recognise more support may be required to sustain the growth of the sector in the short-term.”

A good option for tenants and investors

The sector has gone from strength to strength in recent years, due to its unique offering; it consists of newly built homes, normally flats within blocks, that are constructed to a high standard with tenants rather than homeowners in mind. They often include additional amenities and shared spaces to bring a community feel.

The property type is particularly popular among young professional tenants, who want to live in a sociable yet more high-end home than a traditional buy-to-let, and they tend to be built in or close to city centres and good transport links. For property investors, they can offer a more secure rental income and capital growth pipeline.

It can also be a more hands-off option than standard buy-to-let housing, as it is often inclusive of professional management, which can deal with many issues such as general repairs and maintenance, as well as sometimes offering a concierge service.

At the moment, many property investors are choosing to concentrate their efforts on some of the country’s major regional cities, as opposed to London, due to the strength of the rental markets as well as the greater prospects for capital appreciation.

There has also been a trend for build-to-rent developers to branch out further into the areas surrounding the regional cities and London, as Jacqui Daly, director, Residential Research and Consultancy, Savills, pointed out.

“With the Bank of England signalling that interest rates are now expected to stay higher for longer, demand for homes for sale is likely to remain weaker in the short to mid-term further fuelling demand for build-to-rent,” she said.

“The sector is expanding beyond the major cities and evolving to offer a wider mix of single-family and multi-family products which will see it become an even more important component of overall housing supply.”

Self-certified Sophisticated Investor

Please read

I declare that I am a self-certified sophisticated investor for the purposes of the restriction on promotion of non-mainstream pooled investments. I understand that this means:

I am a self-certified sophisticated investor because at least one of the following applies:

I accept that the investments to which the promotions will relate may expose me to a significant risk of losing all of the money or other property invested. I am aware that it is open to me seek advice from someone who specialises in advising on non-mainstream pooled investments.

High Net Worth Investor

Please read

I make this statement so that I can receive promotional communications which are exempt from the restriction on promotion of non-mainstream pooled investments. The exemption relates to certified high net worth investors and I declare that I qualify as such because at least one of the following applies to me:

aerial-view-uk-houses

STAY AHEAD OF THE MARKET

Sign-up for first access to new developments and exclusive property investment opportunities.

We send limited and targeted emails on new launches and exclusive deals which best fit your areas. We are trusted by over 30,000 active buyers as their source for new stock.

  • New property developments
  • Professional market reports
  • Property deal alerts
  • Development updates
UK holiday let

FIRST FOR NEWS AND KNOWLEDGE.

Receive trending news straight to your inbox and stay up to date on all of the property market trends and advice.

Established since 2005 we are a leading voice of authority and commentary on the UK property market. Our news is trusted by Apple News & Google News.

  • UK housing market
  • Mortgage & money
  • Buy-to-let landlords
  • Guides & advice

Talk to us

Speak to our UK property experts today:

 

+44 (0) 333 123 0320

Open from 9am-6pm GMT

 

+852 6699 9008

Open from 9am-6pm HKT