The Build to Rent sector in the UK saw a substantial investment surge, reaching £800m in Q3 2024.
- Single family housing is dominating the investment landscape, composing 50.4% of the total.
- Investment growth is driven by both bulk deals and single site projects, illustrating a long-term trend.
- House builders are forming private rented sector partnerships, focusing on sustainable single family housing.
- Challenges remain with high debt and construction costs, but investor interest continues to climb.
The UK’s Build to Rent (BTR) sector has experienced a notable increase in investment, amassing £800 million in the third quarter of 2024. Single family housing distinguished itself by occupying a significant portion of this investment, representing 50.4% of the overall total. Such figures underscore the growing popularity and demand for this type of housing within the investment community.
Driving the rise in interest, both bulk transactions and single site developments have shown significant activity. Investors are not merely reacting to temporary market conditions but are aligning with long-term objectives to establish essential operational infrastructures. Bulk deal investments, amounting to £1.2 billion for the year up to the third quarter, make up half of all investments into the single family housing sector.
House builders are responding to the evolving market by restructuring their business models, creating private rented sector partnerships that emphasize sustainability and long-term commitments to single family housing. This strategic shift is partly a consequence of stagnant sales rates, once buoyed by the Help to Buy scheme, which are unlikely to return to previous highs.
Savills has observed a worrying trend in the contraction of the construction pipeline, which has reduced by 20% over the last year. Alongside this, the broader private rented sector is showing signs of contraction. Nevertheless, BTR investment remains an essential mechanism for replenishing the dwindling rental stock with high-quality homes. Local authorities are urged to proactively engage in BTR project delivery, as collaborations between investors and builders are crucial for ongoing growth.
Guy Whittaker, who leads the UK BTR research at Savills, highlighted the significance of recent single site transactions, which alongside bulk deals, signify a longer-term trend beyond short-term sales market reactions. He notes that high debt, construction costs, and planning regulations, particularly in London, persist as significant hurdles. However, Whittaker asserts the enduring appetite for investment from those shifting focus from other commercial real estate sectors towards residential living.
Despite challenges in planning and costs, the Build to Rent sector shows enduring potential and investor interest.
