A new report estimates that the volume of capital committed to the market for professionally-managed rental accommodation in the UK to date is £41bn, up 17% from £35bn in 2019.
According to research from Knight Frank, together with residential property review site HomeViews, despite the ongoing market headwinds caused by the Covid-19 pandemic, 2020 will see the highest level of investment ever as investors look for long-term, secure income-producing assets.
A further £19bn of additional capital is ready to be deployed in schemes with planning granted.
This growing appetite for investment into the sector is underpinned by one in five households now renting privately, up from one in ten in 2001, according to the English Housing Survey. Over that same time, the proportion of owner-occupiers has dropped from 70.4% to 63.8%.
The lockdown period, meanwhile, has served to demonstrate the relative resilience of the BTR sector from an investment perspective, with rent collections having been resilient throughout, averaging 95.2% between March and August.
James Mannix, head of residential development and investment at Knight Frank, comments: “Demand for income-producing residential assets continues to grow. It is forecast that 2020 will be a record year for investment into build to rent stock with £2.7 billion spent in the year to date and a figure topping £4 billion anticipated for the whole year.
“The capital committed has come from both new and established market players and is testament to the long-term opportunity afforded by the sector.”
The 2020 Multihousing Report also examined the growth potential of BTR in the UK. The analysis shows there are now 46,178 purpose-designed BTR homes complete in the UK within large schemes of more than 75 units. A further 84,350 homes are either under construction or with planning granted and will be built, let, and managed by professional investors as homes for rent. Despite this pipeline, this represents just 2% of total rental dwellings.
Oliver Knight, head of residential development research, says: “Rental markets have proven to be resilient in times of uncertainty in the past and this will support the market in the medium term. In turn, this will drive further investment into the sector and we expect the capital committed will continue to rise as investors look to increase their exposure to real estate assets that offer secure and stable long-term income streams.
Rory Cramer, CEO & Co-Founder, HomeViews, adds: “Overall, the thousands of reviews we see on HomeViews tell a broadly positive story of the UK’s new build developments. However, private tenants rate their buildings higher than owners and BTR tenants rate their developments highest of all.
“Many of the issues we see being raised by owners and private tenants represent problems that BTR operators have found solutions to. The factors connected to higher ratings for BTR developments – communal events, pet-friendly, concierge, building management – are the very areas where shortcomings lead to much lower building ratings elsewhere, especially for older developments.”
Analysis conducted by HomeViews of resident reviews submitted during the crisis has highlighted the enhanced level of service that many BTR residents enjoy, as well as consistent references to ‘community’ and ‘neighbourhood’. Longer-term, as tenant priorities change as a result of Covid-19, Knight Frank expects the service-driven model adopted by operators – and valued by residents – will emerge as offering clear advantages over the traditional buy-to-let sector.
Cramer, concludes: “The move towards renting is being expedited by a successful BTR industry responding swiftly to residents’ needs and concerns. We now have the opportunity to draw lessons from BTR successes and push standards higher for all residents across the UK’s new build industry.”
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