The build-to-rent sector needs a total of £300bn of investment if it is to meet future levels of demand even after the sector has begun to emerge as “a mainstream investment in the UK”, estate agent Savills has warned.
Build-to-rent (BtR), a controversial category of housing developments often backed by private equity and banking behemoths built solely for the lettings market, has been billed as both a solution to the shortage of rental properties and a physical incarnation of the UK’s broken housing market.
Uptake in the housing class, which is commonplace in European countries like Germany and France and are run by professional operators, has been drastic in the past decade, with over £35bn pumped into the development of 100,000 BtR, Savills said in a report on the sector.
But the property giant also warned that the figure will need to increase by over eight-fold if growing demand is to be met. Savills estimates that an additional million homes will need to be built in the private rented sector by 2031.
There are signs that the fledgling market, whose rapid growth has drawn comparisons to the similarly in-demand purpose-built student accommodation sector (PBSA), sector, is beginning to mature.
Investors will pump over £20bn into already-operational schemes, the report predicted, a quarter of total investment set to rise to 30 per cent between 2029 and 2033.
Q1 of this year saw the highest proportion of investment into lived-in schemes yet.
Piers de Winton, Savills’ head of national investment and single family, said: “The BtR market has made significant progress over the last 10 years. Although the sector is emerging as mainstream investment in the UK, it still represents just two per cent of private rented sector households.
“When we look at more established markets such as Germany and the USA, where institutions own 41 per cent and 37 per cent of homes respectively, it’s clear that there is significant growth potential of the UK BtR market.”
Build-to-rent homes now operate across 100 local authorities in the UK, including every London borough.
de Winton added: “As the sector continues to grow, there are numerous opportunities for investors to achieve similar large-scale portfolios as those in more mature markets.”