Interest Rises in UK Build-to-Rent Investment Schemes
Institutional property investors changing UK’s rental market
Build-to-rent property investment is burgeoning in the UK; are private landlords becoming a thing of the past?
As private landlords are coming under more scrutiny for the quality and management of their housing stock combined with growing pressure from the HMRC, property developers and individual investors are looking at alternative models for rental market investment, such as build-to-rent properties.
Build-to-rent properties are managed by institutional investors rather than individual landlords, and the business model is based on customers’ satisfaction and desire to stay as tenants if they wish. Thus, they provide additional benefits to both tenants and investors, as the system offers more regulation and protection to both sides.
The rental market in the UK is growing for multiple reasons and for millennials renting is increasingly becoming the tenure of choice, so property developers can see strong potential for great opportunities in the build-to-rent housing market.
In 2017, the build-to-rent sector attracted £2.4bn in investment and is now forecast to grow by a further 180% over the next six years.
Separate research from the BPF and Savills, published last month, shows the total number of build-to-rent homes complete, under construction and in planning across the UK has increased by 30% in the past year.
In the UK there are now 117,893 build-to-rent homes – new, high-quality and professionally-managed homes built for tenants – across all stages of the development lifecycle, compared to the total of 90,761 homes at the end of Q1 2017.
Significant deals included build-to-rent operator Grainger agreeing three deals for a total of £86 million in Sheffield, Manchester and Birmingham.
Additional investment from L&G meant that Birmingham alone secured £81 million worth in investment during the fourth quarter.
One of the landmark London deals of 2017 was CPPIB’s £250 million investment in to Lendlease’s Elephant & Castle project.
Telford Homes, a London based property developer, plans to increase the number of rental homes it builds as demand from investors to enter the sector intensifies. The company’s Chief Executive Jon Di-Stefano said the amount of money targeting the sector was “phenomenal”.
“We are increasingly being approached directly by institutions and rental operators seeking investment opportunities and each trying to achieve significant scale as swiftly as possible.”