The UK’s build-to-rent sector is expected to double in value over the next five years, reaching £126bn by 2028.
Research by Knight Frank found the total value of existing and pipeline BTR stock has doubled over the past four years – the firm valued the sector at £35bn in 2019, increasing to £71bn this year.
There are currently 90,000 completed BTR homes across the UK in schemes of at least 75 homes. An additional 67,000 homes are under construction and 74,000 have full planning permission, bringing the total volume to more than 230,000 homes.
The firm said £698m was transacted in Q3 2023, taking year-to-date investment to £2.7bn.
However, Knight Frank’s residential investment team is also expecting £1.6bn of transactions to trade by the end of 2023 or beginning of 2024.
Investment volume for Q3 2023 was 57% below the bumper £1.6bn recorded in Q3 2022 but activity is ahead of the historic average for the first three quarters of 2023.
Investment volumes for the first three quarters have averaged £2.4bn since 2016, compared with £2.7bn this year.
Volumes are down by 22% in the first three quarters of 2022, driven by a 14% drop in deal numbers and lower average deal values. Deal structures are shifting to account for challenges in the debt market.
Guy Stebbings, head of operational BTR at Knight Frank, 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 delivery of much-needed stock.
“Our prediction that the sector’s total value will almost double again by 2028 is testament to its ongoing strength and ability to meet the evolving needs of renters.
“While investment volumes for 2023 have moderated after a record-breaking year in 2022, strong rental demand continues to drive capital into the sector.”
Lizzie Breckner, head of BTR research at Knight Frank, added: “The burgeoning BTR sector reflects a robust investment landscape and a growing appetite for more choice and flexibility in rental housing. Looking ahead, we anticipate strong capital inflows, further fuelling the sector’s expansion.”
“Strong rental demand continues to encourage capital into the sector. Suburban single-family homes for rent are of particular interest to investors. This sub-sector now accounts for 9% of the wider BTR market, and has a pipeline of more than 20,000 homes.”
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