The UK’s Build to Rent (BTR) market has recorded its second highest year of investment in 2023, amassing a whopping £4.5 billion. This figure, hot on the heels of the 2022 record of £4.6 billion, showcases a robust and expanding sector. What’s even more striking is the remarkable surge in Single Family Housing (SFH) investments, which have skyrocketed to £1.9 billion – that’s a massive 42% of the total investment, up from just 8% the previous year.
Why is the Build to Rent Market Soaring?
Experts at Savills, a leading property advisor, highlight several key factors fuelling this investment surge:
- High Demand for Rental Homes: The UK’s rental market is thriving, driven by sky-high mortgage rates and a decrease in buy-to-let properties. The end of the Help to Buy scheme has further intensified this demand.
- Government Housing Targets: The UK government aims to hit a target of 300,000 new homes per year. To achieve this, Savills warns that a significant portion – about 60,000 homes – must be available for private rent annually.
- Economic Resilience: Despite the challenges of high debt costs and rising material and labor costs, the BtR sector has shown remarkable resilience. It’s not just surviving – it’s thriving, with growth fuelled by an imbalance in housing supply and demand, leading to substantial rental growth. This has resulted in returns that keep pace with inflation and yields that are comparatively strong.
Milestones and Future Projections
The BTR market isn’t just growing; it’s smashing records:
- Over 100,000 Completed Homes: The UK has surpassed a significant milestone with more than 100,000 completed BtR homes.
- Thousands More in the Pipeline: An additional 53,800 homes are currently under construction, with a future pipeline of 112,800 homes, including those in the pre-application stage. This totals up to 267,000 homes in the sector.
- Bright Future Ahead: Looking forward, the sector is expected to grow to around 360,000 homes by 2033. According to Guy Whittaker, Head of UK Build to Rent Research at Savills, the sector’s strong fundamentals and increasing operational efficiencies bode well for its continued expansion.
Geographical Expansion and Diversification
The BTR sector’s growth is not just limited to certain areas. While the North West, particularly around Liverpool and Manchester, has been a hotspot, the planning pipeline is now spreading:
- Emerging Sites in the Midlands and South East: These regions, known for higher land prices, are becoming increasingly significant in the BtR market.
- London and Core Cities Leading the Way: Over the next five years, London and the core cities are expected to deliver a majority of the BtR completions. London is projected to add 35,000 homes, while the core cities will contribute another 33,000.
In summary, the UK’s Build to Rent market is not just surviving in challenging economic times; it’s thriving, growing, and diversifying. With billions being invested and thousands of homes in the pipeline, this sector is a key player in the UK’s housing market and is set to reshape the landscape of rental housing.