UK BTR sector records second highest year of investment

Savills' latest report highlights that the UK Build to Rent market has recorded its second highest year of investment.

Manchester city | Savills IM | BTR News
Manchester city.

Property consultancy Savills has released insights from its report on the UK Build to Rent market. According to the report, 2023 saw a total of £4.5bn of investment, signalling the second highest year on record, following 2022 (£4.6bn). Single-family housing (SFH) took a record-breaking share of investment at £1.9bn, accounting for 42% of the total figure, up from just 8% in 2022.

Savills notes that a key factor driving the surge in investment is the demand for rental homes. Strong rental demand is linked to elevated mortgage rates, lower numbers of buy to let properties and the end of the Help to Buy scheme.

The report warns that if the government is to reach its 300,000 homes per year target, 60,000 homes will need to be delivered for private rent each year.

“Despite the macro-economic challenges – elevated cost of debt and continued material and labour-cost inflation – the sector has proven resilient. The Build to Rent market has seen continued growth due to the housing supply and demand imbalance and high levels of rental growth. This has led to inflation-matching returns while yields have proven comparatively strong. The fundamentals of investing in Build to Rent remain sound with growing possibilities to leverage operational efficiencies from better data on portfolio performance and experience. This has put the sector in good stead for its next phase of growth and we project the sector will grow to reach 360,000 homes by 2033.”

Guy Whittaker, Head of UK Build to Rent Research, Savills

The UK’s Build to Rent stock surpassed a significant milestone of 100,000 completed homes, with a further 53,800 homes under construction. The future pipeline currently stands at 112,800 homes, including those in the pre-application stage. This brings the total size of the sector to 267,000 homes.

According to Savills, the planning pipeline has also expanded beyond concentrations in the Northwest, especially around Liverpool and Manchester. Emerging sites in the Midlands and Southeast, where land prices are higher, demonstrate the sector’s evolution and diversification.

Over the next five years, London and the core cities are expected to provide 62% of completions, with London providing 35,000 homes and core cities delivering 33,000 new Build to Rent homes.