£8bn investment heading for UK’s SFH BTR sector

Q1 2023 SFH BTR investment volumes surpass previous years’ total, according to the 2023 Single Family Housing Report.

Knight Frank’s 2023 Single Family Housing Report reveals that £8bn investment is heading for the UK’s SFH BTR sector | BTR News

Despite the single-family housing Build to Rent (SFH BTR) sector remaining in the early stages of its evolution when compared to the more mature multifamily market, interest and support from traditional and Build to Rent developers and institutional investors means that a further £8bn of unspent investment is available to be deployed by leading single family housing investors over the next three to five years. 

The UK’s SFH BTR market is on a rapid growth trajectory, with the number of complete and operational schemes increasing by 11% since 2021, according to the latest research from global property consultancy Knight Frank.

“Though single-family housing remains in the early stages of its evolution compared with the more mature multifamily market, it is clearly on a rapid growth trajectory. The more challenging economic backdrop makes investing in sectors driven by demographic rather than economic shifts a logical one, and there is a huge opportunity for funders and developers to capitalise on solid near-term and projected long-term demographic trends.”

Jack Hutchinson in the Residential Investments team, Knight Frank

Research from Knight Frank’s 2023 Single Family Housing Report reveals that over £450m of deals have been agreed in Q1 2023 – which surpasses the full-year 2022 investment total of £330m. according to Knight Frank, this translates into the potential for nearly 30,000 homes to be delivered at today’s values. 

The number of complete and operational SFH BTR schemes currently stands at 9,466 homes, with a further 9,250 homes either under construction or having received full planning permission. This takes the total pipeline to nearly 20,000 new homes.

“Despite a growing pipeline, these figures will likely fall short of demand. More than 60% of privately renting households in the UK already live in a house, equating to over three million households. While single family housing delivery is increasing, it accounts for just 11% of the overall Build to Rent delivery to date, and only c.0.3% of the total number of privately renting households who live in houses, highlighting the scale of the opportunity.”

Jack Hutchinson in the Residential Investments team, Knight Frank

For investors already active in the Build to Rent market, delivering SFH BTR offers exposure to different geographies and a diversified demographic, further consolidated by the gap between new tenant demand and supply. 

The key investment fundamentals for the SFH BTR market remain strong; tenants tending to be less frequent movers because of their ties to schools, employment hubs and support networks. A lower turnover of tenants, longer tenancy terms, and fewer and shorter void periods all help maintain more secure income streams for investors. 

“Growing affordability pressures, the end of Help to Buy and a structural undersupply of homes in the rented market have culminated in significant tailwinds for the private rented sector. Consequently, single family housing is anticipated to play a far more significant role both in housing delivery and institutional real estate portfolios over the coming years.”

Oliver Knight, Head of Residential Development Research, Knight Frank