Report: significant market need for affordable Build to Rent strategy

In its latest UK Housing Market Report, Hilltop Credit Partners predicts a continued drop in inflation and backs an affordable Build to Rent strategy.

Modern executive flats and office building in Canary Wharf, London | Hilltop Credit Partners | BTR News
Modern executive flats and office building in Canary Wharf, London.

In its latest UK Housing Market Report, Tiger Craft, President and COO of Hilltop Credit Partners predicts a continued drop in inflation following the announcement on inflation falling, and is backing an affordable Build to Rent strategy whilst many are shouting about student accommodation being the key opportunity. 

The UK entered a shallow recession in late Q3 following six months of expansion says Tiger Craft, noting that inflation will continue to drop in the coming months. This is supported by an announcement this week that UK inflation fell sharply in October to 4.6% from 6.7% the previous month. 

While mortgage rates continue to fall from their peak levels seen this past summer, the ongoing effect of legacy fixed-rate mortgages re-pricing to today’s levels will continue to effect affordability and transaction volumes.  House prices have to date been more resilient than expected — driven by limited stock on the market, a lack of forced sellers, healthy levels of borrower equity, and relatively low unemployment rates – but mortgage approvals and sales volumes are likely to remain below normal levels for the next six months as markets re-calibrate.

As an entire generation has been priced out of the property market, driving demand to levels 50% above pre-Covid levels, while rental supply has contracted significantly, driven by an exodus of private landlords from the market. Additionally, rents as a % of income have reached a ten-year high of 33%, they remain below mortgage payments of 38%.

House building activity has been contracting for 11 straight months, even though housing starts rose by 75% in Q2 (due to a rush to start projects before a June deadline requiring new homes to produce 30% less carbon emissions). Tiger believes significantly lower levels of completions are likely over the coming year, exacerbating what is already a structurally under-supplied market.

Hilltop sees a significant market need for an affordable Build to Rent strategy, which would address an acute supply/demand imbalance in the market and provide attractive potential risk-adjusted returns for investors.