Despite challenging economic conditions, the Build to Rent sector continued to expand in the past twelve months – but sharp increases in build and financing costs are stalling delivery in London.
The analysis, conducted by the British Property Federation (BPF) in partnership with Savills, shows that the total number of Build to Rent homes completed or in the pipeline across the UK rose to 263,694 at the end of Q3 2023, up 11% year-on-year (from 237,554).
The number of completed homes increased by 11% to 82,660, homes under construction increased by 12% to 52,852, and those in planning increased by 10% to 102,042.
Activity in regional cities – which accounts for 60% of all completed and pipeline Build to Rent homes – remained relatively robust. The number of units under construction increased by 16% y-o-y to 40,231, and new starts in Q3 2023 totalled 3,339 units.
“With the Bank of England signalling that interest rates are now expected to stay higher for longer, demand for homes for sale is likely to remain weaker in the short to mid-term further fuelling demand for Build to Rent. The sector is expanding beyond the major cities and evolving to offer a wider mix of single-family and multifamily products, which will see it become an even more important component of overall housing supply.”Jacqui Daly, Director, Residential Research and Consultancy, Savills
In London, new starts totalled 434 units in Q3 and 266 units in Q2, and Build to Rent homes under construction increased just 5% y-o-y in Q3. This reflects the severe impact on the delivery of larger and more capital-intensive schemes, due to the increases in build and financing costs.
The report also highlights the rapid growth of the sector across the UK, with 200 local authorities who have now consented Build to Rent developments or have schemes in the pipeline, up from 100 authorities five years ago. The national planning pipeline also remains robust, with 57,214 homes with detailed planning permission, and 25,792 homes at detailed application stage.
“There is huge demand for purpose-designed homes for rent in London and major cities, but the sector is facing significant headwinds in terms of delivery. Uncertainty on inflation and where interest rates will peak is causing projects to stall, particularly in London where developments are typically higher-density and more complex.
“However, there are nearly 60,000 homes with a detailed planning application in the sector suggesting market activity could pick up quickly when conditions are right, but policymakers must recognise more support may be required to sustain the growth of the sector in the short-term.”Ian Fletcher, Policy Director, British Property Federation