Meeting demand in the booming Build to Rent market
Renting has proven an increasingly viable answer to the UK’s housing needs, with over four million people living in rental properties in 2021.
As house price growth now moderates — and even turns negative — renting your home is still likely to be an attractive option, especially given that the alternative, buying, may trigger difficulties securing a high loan-to-value (LTV) mortgage and meeting rising interest payments.
However, despite the popularity of renting, there remain supply and investor return issues to consider as the market matures.
Answering the call for Build to Rent properties
Build to Rent is a relatively new concept. It defines residential schemes explicitly designed to be rented out by institutions and professional landlords as opposed to amateur landlords who buy and let the properties themselves, often without residential management experience.
By placing rental properties in the hands of experts, Build to Rent schemes have the potential to improve many aspects of renting and lead institutional owners to demand better quality of their long-term assets.
Residents of Build to Rent properties have access to communal facilities like concierge desks, gyms, lounges and restaurants. Maintenance and repairs should, at least in theory, be undertaken quicker by staff employed directly by the landlord. Moreover, properties are usually built to higher standards — especially in terms of energy performance and the use of sustainable materials.
According to Savills’ UK Build to Rent Market Update for Q2 2022, 237,400 Build to Rent properties are already completed or in development in the UK.
The Build to Rent market has seen exponential growth in 2022 thus far, with £2.5 billion invested in the UK Build to Rent sector during the first six months of this year. This growth has been noted by other investors who have been given the confidence to enter the market.
However, the market has not been without its challenges.
Making progress amidst investor uncertainty
Geopolitical turbulence and economic uncertainty have given investors every reason to do further due diligence on their plans.
The war in Ukraine has complicated international relations, placing greater pressures on cross-border agreements with negative consequences for the economy. UK inflation recently reached 10.1%, — the highest figure in 40 years, — which has changed how we all prioritise our finances and reawaken investors to focus on buying ‘inflation-proofed’ assets.
Researchers will say that residential property has been a good hedge for inflation. However, whether or not it is realistic to assume that rents can keep up with inflation — especially in a period of unprecedented pressure on household finances — remains to be seen.
What seems certain, however, is that investors remain attracted to the better yields the UK offers compared to other European markets.
New investment opportunities
We can expect the Build to Rent market to expand as investors broaden their horizons.
There is strong evidence that investors will consider locations outside of London for new Build to Rent property sites, with Build to Rent properties gaining traction in Manchester, Birmingham, Liverpool and Leeds.
Rynda Property actively seeks opportunities for real estate investment across the UK and mainland Europe. With many years of experience and a team of locally based experts in various real estate markets, we can source attractive Build to Rent opportunities for our clients.
To learn more about Rynda Property’s real estate investment and asset management services, contact us via our online form or call +44 20 3328 4700.