UK: Savills’ latest report on the UK BTR sector reveals a total investment of £4.5 billion in 2023, £1.9 billion (42 per cent) of which went to single family rentals.
The £4.5 billion figure was the second highest on record, down slightly on 2022’s £4.6 billion.
The 42 per cent share of total investment recorded by the SFR sector was up dramatically, from up from just eight per cent in 2022.
Savills says that a key factor driving the surge in investment is the demand for rental homes. Strong rental demand is linked to elevated mortgage rates, lower numbers of buy-to-let properties and the end of the Help to Buy scheme. The report warns that if the government is to reach its 300,000 homes per year target, 60,000 homes will need to be delivered for private rent each year.
Guy Whittaker, head of UK BTR research at Savills, said: “Despite the macro-economic challenges – 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.”
The UK’s BTR stock surpassed a significant milestone of 100,000 completed homes, with a further 53,800 homes under construction. The future pipeline currently stands at 112,800 homes, including those in the pre-application stage. This brings the total size of the sector to 267,000 homes.
Whittaker added: “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.”
Savills notes in its report that the planning pipeline has also expanded beyond concentrations in the north-west, especially around Liverpool and Manchester. Emerging sites in the Midlands and south-east, where land prices are higher, demonstrate the sector’s evolution and diversification. Over the next five years, London and the core cities are expected to provide 62 per cent of completions, with London providing 35,000 homes and core cities delivering 33,000 new BTR homes.
The next Urban Living webinar, on February 9th at 11:00am, will take a deep dive in to the SFR sector. Click here to to register for the session, which will include contributions from the UKAA’s Graham Sibley, UK SFA CEO Richard Berridge and Sandra Jones, managing director of Dataloft.
