Research Shows Build-to-Rent Sector Could Reach £126bn by 2028
New analysis indicates that the UK’s build-to-rent (BTR) sector is poised for significant growth, with its total value expected to nearly double over the next five years, reaching £126 billion by 2028.
Knight Frank’s research reveals that the combined value of existing and upcoming BTR properties has already doubled within four years, going from £35 billion in 2019 to £71 billion in 2023.
Read on to see how this affects Property Investment in 2023 and beyond.
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What Is Build-to-Rent?
Build-to-rent is a property market model where purpose-built residential properties, typically large apartment complexes, are constructed specifically for rental purposes.
This concept provides tenants with modern, professionally managed homes and amenities while offering long-term, stable income for property investors.
As the developments are all brand new and purpose-built for renters, they are usually high-quality, attractive residences with luxury facilities. This can include an on-site gym, spa, cinema, or even a recording studio for podcasters. Due to this, rental income can be maximised as tenants are willing to pay more for the excellent amenities and superior features on offer.
Not only are the physical features of build-to-rent developments perfect for luring high-paying renters, but they also offer a stylish lifestyle. These impressive facilities allow tenants to become part of a community of affluent renters, making the properties even more appealing to young professionals.
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How Does the Build-to-Rent Sector Look at the Moment?
The UK currently boasts 90,000 completed BTR homes within developments of at least 75 units. Furthermore, there are 67,000 units currently under construction, and an additional 74,000 have received full planning permission, resulting in a total volume of over 230,000 BTR homes.
In the third quarter of 2023, transactions in the BTR sector reached £698 million, bringing the year-to-date investment to a total of £2.7 billion.
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What Did Knight Frank Say About the UK Build-to-Rent Projections?
Head of Operation Build-to-Rent at Knight Frank, Guy Stebbings, said:
“The UK’s BTR sector is experiencing a remarkable surge in overall worth, with stock doubling in total value over the past four years. This trend reflects growing investment volumes based on rising demand for rental homes across the UK, underpinned by changing lifestyle preferences and housing market dynamics.
“The urgent need for rental housing in the UK reinforces the ‘social good’ being provided by investors who are accelerating the delivery of much-needed stock. Our prediction that the sector’s total value will almost double again by 2028 is a testament to its ongoing strength and ability to meet the evolving needs of renters.”
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Why Is Build-to-Rent Important in 2023?
Due to the cost-of-living crisis and various other factors, a huge imbalance exists between rental supply and demand in the private rented sector. With more people looking for homes than available, newly built houses and apartment complexes will help alleviate the pressure on the market and allow more people to find somewhere to live.
It’s important to remember this supply and demand issue has driven up rental costs, meaning an investment in a build-to-rent project may see a significant ROI – particularly if you invest in an up-and-coming area with good capital growth potential and high yields.
Another benefit of build-to-rent is that the properties are brand new and, as such, can include the most cutting-edge energy-saving technology. These features include rainwater harvesting, air-source heat pumps, solar arrays, and business management systems. This will come as a relief to buy-to-let investors who may be worried about possible future changes to legislation regarding EPC ratings.
These properties are often built with energy saving in mind, keeping investors ahead of the curve and preventing the costly retrofit of eco-features that most property owners will have to undertake. It also makes the development more appealing to renters, who are willing to pay more in rent in order to keep their energy bills down and reduce their personal carbon footprint.
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