Growing investment for Build to Rent (BTR) properties is signaling a major shift in the way city dwellers find their homes. The BTR sector has seen an influx of £4.5 billion in investments throughout 2023, as reported by the leading lettings agency Savills. This investment marks the second highest annual figure ever recorded, slightly trailing behind the £4.6 billion poured into the sector in 2022.
A New Frontier in Housing
The BTR movement is not just changing the skyline but also the living habits of thousands. With over 100,000 BTR homes now completed across major UK cities and an impressive pipeline of 112,800 homes awaiting development, the sector is rapidly becoming a cornerstone of urban housing. This growth is fueled by a cocktail of high mortgage rates, a dwindling supply of buy-to-let properties, and the conclusion of the Help to Buy scheme, propelling demand for rental homes to new heights.
Single Family Housing Leads the Charge
A standout trend in 2023 has been the remarkable rise in investments directed towards Single Family Housing within the BTR sector. Accounting for a whopping 42% of the total investment, or £1.9 billion, this segment has jumped from occupying a mere 8% of the investment pie in 2022. This pivot highlights a growing preference among families and individuals for the flexibility and convenience offered by BTR homes.
The BTR sector’s resilience and growth are remarkable, especially against the backdrop of economic challenges such as rising debt costs and inflation in material and labour costs. According to Guy Whittaker, head of UK Build to Rent research at Savills, “Despite the macro-economic challenges – elevated cost of debt and continued material and labour-cost inflation – the sector has proven resilient. The BtR market has seen continued growth due to the housing supply and demand imbalance and high levels of rental growth. This has led to inflation-matching returns while yields have proven comparatively strong. The fundamentals of investing in BTR remain sound with growing possibilities to leverage operational efficiencies from better data on portfolio performance and experience. This has put the sector in good stead for its next phase of growth and we project the sector will grow to reach 360,000 homes by 2033.”
Expanding Beyond Traditional Boundaries
The geographical diversity of BTR investments is expanding, moving beyond its traditional strongholds in the North West, particularly around Liverpool and Manchester. New developments are springing up in the Midlands and South East, indicating a broadening appeal and recognition of BTR’s potential across the UK. Over the next five years, London and other core cities are poised to deliver 62% of all new BTR completions, adding 35,000 homes in London and 33,000 in other major urban centers.
A Bright Future for BTR
The outlook for the UK’s BTR sector is overwhelmingly positive, with projections indicating growth to 360,000 homes by 2033. This optimism is grounded in the sector’s ability to leverage operational efficiencies and better data analytics, enhancing portfolio performance and tenant experiences.