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UK Build-to-Rent Market Enjoys Second Highest Year of Investment

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    Significant Investment Marks New Growth in Build-to-Rent Sector

    The most recent data from Savills shows another significant year for the UK build-to-rent market. The level of investment in new builds shows the extent of the current supply and demand issue but also highlights the levels to which developers will address this issue.

    Substantial investment in the sector could mean new opportunities for UK property investors considering buying a buy-to-let property.

    Let’s look at this news in more detail.

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      How Much Investment Did the Build-to-Rent Market See in 2023?

      According to the latest Savills Build-to-Rent Market Report, the UK saw £4.5 billion worth of investment in 2023. This was the second-highest investment total for a single year, falling slightly short of 2022’s total of £4.6 billion.

      Interestingly, Single Family Housing (SFH) accounted for over 40% of the investment share, reaching £1.9 billion. In comparison, SFH only accounted for 8% of all investments in 2022.

      Elevated mortgage rates, a decrease in developer properties, and the conclusion of the Help to Buy scheme have led to robust rental demand. The report proposes that, for the government to achieve its annual target of 300,000 homes, it must ensure the delivery of 60,000 houses for private rent every year.

      Guy Whittaker, Head of UK Build to Rent Research, Savills, comments: “Despite the macro-economic challenges – the elevated cost of debt and continued material and labour-cost inflation – the sector has proven resilient.

      “The BtR 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.”

      Discover More: Check out our guides on safe investments in the UK and buying investment property for more property market insights.

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      What Is the Level of Build-to-Rent Stock in the UK?

      In 2023, the build-to-rent inventory in the UK achieved a noteworthy milestone, surpassing 100,000 completed homes, while an additional 53,800 homes are currently under construction. Looking ahead, the future pipeline encompasses 112,800 homes, including those in the pre-application stage. This results in a comprehensive sector size of 267,000 homes.

      Whittaker continued: “The fundamentals of investing in BtR 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.”

      Learn More: If you want to know more about regional property investment, explore our handy area guides, including Buy-to-Let in Gloucester and Buy-to-Let in Bradford.

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        Where Are the Best Areas for Build-to-Rent Investment?

        According to Savills’ report, the planning pipeline has extended beyond the focal points in the North West, particularly cities like Liverpool and Manchester. The emergence of up-and-coming areas in UK build-to-rent circles, such as the Midlands and South East, reflects the evolving and diversifying nature of the build-to-rent sector.

        In the upcoming five years, it is anticipated that London and the core cities will contribute 62% of completions, with London alone delivering 35,000 homes and core cities adding 33,000 new build-to-rent homes.

        It is no surprise that Liverpool and Manchester are hotbeds for build-to-rent investment. Both cities are popular with buy-to-let investors due to their good-value property prices, huge student population, and young professionals choosing to live in the city due to strong job prospects.

        In addition, numerous regeneration projects – like the Baltic Triangle and Knowledge Quarter – ensure that Liverpool city centre remains a hotbed for innovation, attracting tenants willing to pay premium prices for all the conveniences of living in a famous UK city.

        For more information on North West property investment, check out our guides on new builds in Manchester and apartments for sale in Liverpool.

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        Dale Barham

        Dale is a property content writer at RWinvest. Keeping a close eye on the UK property market, Dale helps our readers stay informed and up to date on the latest market news and statistics.