Build-to-Rent sector continues to expand

Posted on Wednesday, January 10, 2024

Despite sharp increases in build and financing costs, the UK's Build-to-Rent sector has seen year-on-year growth of 11% over the past 12 months, according to new analysis.

New research by the British Property Federation conducted in partnership with Savills, shows that the total number of BTR homes completed or in the pipeline across the UK rose to 263,694 at the end of Q3 2033, up 11% year-on-year (from 237,554).

The number of completed homes increased by 11% to 82,660 while the number of units under construction and in planning increased by 12% (to 52,852) and 10% (to 102,042) respectively.

In regional cities, which account for 60% of all completed and pipeline BTR homes, activity remained relatively robust with the number of units under construction increasing by 16% y-o-y (to 40,231) and new starts in Q3 2023 totalling 3,339 units.

Meanwhile in London, increases in build and financing costs are having a severe impact on the delivery of larger, more capital-intensive schemes. New starts in the Capital totalled just 434 units in Q3, and 266 units in Q2. Units under construction increased just 5% y-o-y in Q3.

The report also highlights that 200 local authorities have now consented to BTR developments or have schemes in the pipeline, up from 100 authorities five years ago, underlining the rapid growth of the sector across the UK. The national planning pipeline remains robust, with 57,214 homes with detailed planning permission, and 25,792 homes at the detailed application stage.

Ian Fletcher, Policy Director, British Property Federation, said: “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.”

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