The UK Build to Rent sector saw significant investment in Q3 2024, with total funds reaching £800 million.
- Single Family Housing (SFH) investments have become prominent, making up over half of the total investment.
- Bulk and single site transactions are driving the growth in the Build to Rent market.
- The sector is adapting to changes, including a decline in the construction pipeline by 20%.
- Savills highlights the necessity of Build to Rent for maintaining high-quality rental housing.
In the third quarter of 2024, the UK Build to Rent (BTR) sector attracted investments amounting to £800 million, reflecting a substantial rise in funding aimed at enhancing the rental market availability. This surge is largely attributed to the increasing focus on Single Family Housing (SFH), which accounted for a notable 50.4% of the total investments.
The investment dynamics were influenced by both bulk deals and single site transactions. Bulk deal investments alone reached £1.2 billion for the year up to Q3 2024, demonstrating considerable investor interest in establishing essential operational infrastructure. Concurrently, single site schemes saw a marked increase, growing from £0.27 billion to £1.2 billion, signifying a strategic shift towards diversified investment approaches within the sector.
The market adaptation involves house builders restructuring their business models to form partnerships within the private rented sector. This move underscores a long-term commitment to the SFH market, particularly in the wake of evolving sales rates post the Help to Buy era, which may not return to prior levels.
Amidst these developments, the construction pipeline has dwindled by 20% over the past year, posing potential challenges for future supply. However, according to Savills, the Build to Rent initiative is critical in countering the decline of rental stock, aiming to provide high-quality, efficient homes.
Savills further stresses the vital role of local authorities in facilitating BTR development, advocating for proactive collaborations between investors and house builders to ensure continuous growth. Guy Whittaker, heading UK BTR research at Savills, states, “The rapid growth of single site transactions alongside bulk deals shows that the recent rise in investment is a longer-term trend, rather than just a reaction to a softer sales market.”
Viability remains complex due to high debt and construction costs, coupled with planning hurdles, notably in London. Yet, investor demand stays robust, with financial flows increasingly diverted from other commercial real estate sectors into housing ventures, indicating a shift in investment priorities.
Build to Rent investment is poised to bridge the rental supply gap, provided systemic challenges are addressed.
