Cushman & Wakefield report finds SFH BTR is on the rise

Cushman & Wakefield has released its latest report that finds UK single-family housing Build to Rent is on the rise.

CGI of Placefirst's Esh Winning's single-family Build to Rent scheme. Cushman & Wakefield has found through its latest report that the sector is on the rise in the UK | BTR News
CGI of Placefirst's Esh Winning's single-family Build to Rent scheme.

According to data from Cushman & Wakefield, there are 9,626 completed single-family housing units, 9,122 under construction, and 9,187 in planning at the second quarter of this year. During Q2 2023, single-family housing accounted for 47% of the total £800m invested into the Build to Rent market.

Cushman & Wakefield’s report states that the number of single-family housing units is likely to increase rapidly as property developers look to diversify exit routes due to a weaker sales market. With mortgage rates continuing to climb, the report finds that paying a mortgage is now more expensive than renting. Average monthly mortgage payments in the UK are 17% more expensive than rents, while in London they are 29% greater.

“Traditional housebuilders are continuing to explore the Build to Rent sector with a number looking to de-risk some of their existing schemes, as they see individual sales slow, by selling block opportunities to active investors. As the mortgage affordability issue continues to bite, we are likely to see more opportunities for investors with housebuilders in both the Build to Rent and single-family.”

Millie Todd, Head of Living Research, Cushman & Wakefield

Two key single-family housing Build to Rent deals took place in Q2 2023 – Barratt Developments’ sale of 604 homes to Citra Living, the wholly owned subsidiary of Lloyds Banking Group and MJ Gleeson, Carlyle and Gatehouse IM’s acquisition of one of the largest single-family housing transactions in the UK – with a discount of around 5% to 10%, making it attractive to both investors and property developers.

With a 13% increase from last year, there are now 88,100 completed Build to Rent units. However, construction has begun to slow due to the current economic headwinds – such as the cost of borrowing – which is complicating deal structuring.

“Investors who paused activity following the mini-budget and its ramifications have started to return to the market, which is a positive sign. Constrained supply for the past few years has opened-up opportunity for the more established and new market players as best in class funding opportunities have seen competitive bidding processes resume. Overall, the investor rational for Build to Rent remains strong and money remains committed to the sector. However, cost of debt and a changing construction environment, is temporarily dragging the pace of investment.”

Mark Clegg, Head of Residential Capital Markets, Cushman & Wakefield