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27/04/2020

Build-to-rent properties on the rise

Words: Laura Edgar
Housing / iStock_000074406885

Between the first quarter of 2019 and the first quarter of 2020, the number of completed build-to-rent homes rose by 42 per cent to 43,236 compared with the previous period, according to research published by the British Property Federation (BPF).

The research, conducted by Savills on behalf of the BPF, found that there were 33,505 under construction, down from 37,549, and 80,771 going through the planning system – a rise of 12 per cent from 72,184 properties.

Outside of London, the number of completed build-to-rent homes increased by 58 per cent in the 12 months to the end of Q1 2020, while the capital saw an increase of 29 per cent. 

There are currently 43,472 properties going through the planning system in the regions, a rise of 41 per cent compared with the previous period. The number going through the planning system in London fell by 10 per cent to 37,299. 

Growth in the number of homes under construction has been “relatively static” in London, the BPF explained, with a 2 per cent rise, although it has decreased in the regions with a decline of 21 per cent.

The trade association for UK residential and commercial real estate companies highlighted that typically, professional investment firms finance build-to-rent developments and manage them for the long term, but this research found that local developers are currently responsible for 28 per cent of the market. UK housebuilders are responsible for 27 per cent, major UK developers are responsible for 17 per cent, and contractors (14 per cent), registered providers (9 per cent) and major international developers (3 per cent) account for the rest.

It is too early to know what impact the coronavirus will have on the build-to-rent sector’s housing pipeline, says the BPF. 

“Pain is being felt across all sectors of the economy, but build to rent remains attractive to investors and we know from past experience that demand for rental housing usually leads homes-for-sale out of any recovery,” said Ian Fletcher, director of real estate policy at the BPF.

“Our statistics show that a quarter of build-to-rent delivery is now coming from major housebuilders and their support of the sector through, for example, access to land could really boost growth in this sector.

“One concern is the London pipeline – the statistics show a sharp decline in the number of homes in planning across the capital. London was a leader in championing build to rent and the sector’s role in adding much-needed new homes to its housing market. The imbalance between housing demand and supply has not gone away, and if anything the impact of coronavirus has shown us that a safe and secure home for everyone is fundamental, and we should be doing everything we can to ensure the capital’s housing market delivers for everyone.”

Jacqui Daly, director of Savills residential research, added: “We’d expect high levels of uncertainty to increase demand for rented accommodation as people look to avoid longer term commitments such as mortgages, or if borrowing remains more constrained. At the same time, we expect to see the leveraged buy-to-let sector to remain under pressure, driving demand into build to rent.

“This means that once lockdown is lifted, build-to-rent developers should be confident to progress stalled developments.”

The research is published quarterly as an interactive map on the BPF’s website. It is produced by Savills and draws on Molior data in London.

Image credit | iStock

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