The number of completed Build to Rent homes in the UK has increased 13% in the past year to 88,100 units. This is despite market conditions slowing development activity, according to new research by the British Property Federation (BPF) undertaken in partnership with Savills.
There are currently 253,402 Build to Rent homes either completed, under construction or in the planning pipeline – up 12% in the past twelve months. Single-family housing (SFH) Build to Rent continues to expand strongly, with 28,000 units completed or in the pipeline. It also makes up 12% of the Build to Rent sector.
The number of homes under construction increased by 9% – over 2,000 homes – buoyed by major housebuilders agreeing to forward fund transactions with investors. There was also an increase of 13% in the number of new Build to Rent homes in the design and planning phase, to 111,815 homes. The number of new Build to Rent homes in the design and planning phase increased 13% to 111,815.
“It’s not surprising to see the rate of growth of Build to Rent slow under the current uncertain economic circumstances. With the UK struggling to shake off stubbornly high inflation, the BOE continues to use its go-to weapon, interest rates. This is impacting progress in the sector.
“However, the slow growth is not intrinsically a reflection on the Build to Rent sector as a whole which retains the confidence of funding partners. But an element of repricing is inevitable, and we are seeing this process stalling momentum for the time being. Perhaps only for a short time. It’s enormously encouraging to see SFH schemes under construction up more that 53% on this time last year. Given that houses can be completed more rapidly, this will quickly feed into delivering operational homes before the end of the year.”Richard Berridge, Blackbird RE Advisory
According to the new research, build cost inflation and wider economic uncertainty looks set to slow down delivery, with 5,549 units starting construction in the first half of 2023, down 55% on the same period last year.
“With interest rates now expected to stay higher for longer demand for new homes for sale is likely to be weaker which will constrain housing delivery. Build to Rent will have a key role to play in maintaining overall housing supply, and in the last quarter we have seen examples of major housebuilders agreeing to deliver a pipeline of rented homes, which has boosted the pipeline. The continued diversification of the profile that Build to Rent deliverers is critical to its continued growth.”Jacqui Daly, Director, Residential Research and Consultancy, Savills
In London, high land values mean schemes are typically larger and more capital intensive. In this area, construction starts totalled 836 units, down 80% year-on-year from 4,415 in H1 2022.
“Build to Rent is continuing to expand but the sector is not immune to the current economic uncertainty and cost inflation. At the current time it is very challenging to deliver large-scale capital-intensive schemes, particularly in London, but there are fewer obstacles to the delivery of smaller developments in regional cities and single-family housing both which continue to grow as a proportion of housing supply in UK cities.”Ian Fletcher, Policy Director, British Property Federation