Whilst we entered 2023 under the spectre of a moderate recession with high inflation and rising interest rates putting downward pressure on growth, the UK economy has avoided a recession. However, it does continue to remain under the cloud of high inflation and interest rates.
This environment has presented more of a challenge for the real estate sector. Against this backdrop, some sectors have performed better than others. CBRE reflects on its 2023 Real Estate Market Outlook, highlighting what they said would happen in the Build to Rent sector, what has happened, and what will happen next.
What CBRE said would happen
Investment appetite for Build to Rent – and co-living – would remain strong. However, according to CBRE, pricing would adjust to reflect the higher interest rate environment. The challenging sales market would also present opportunities for single-family Build to Rent investors.
What has happened
Build to Rent investment totalled £1.9bn in H1 2023, 21% below the same period last year. Although this indicates a slowdown, the outlook remains positive. CBRE analysis also shows that the single-family housing (SFH) Build to Rent sector saw record investment volumes of £460m in H1 2023, as well as record investment in Q1 2023. Yields across the sector have trended stable.
What will happen next
The rental market will continue to see demand significantly outstrip supply. Increasing mortgage costs for potential first-time buyers who are currently renting, a strong labour market and high inflation will fuel rental demand. CBRE forecast that rental values will increase by 4.7% across the UK in 2023.