The UK’s single-family housing market has seen £450m of deals agreed in Q1 2023, surpassing the full-year 2022 investment total of £330m, according to Knight Frank.
The firm’s 2023 Single Family Housing Report said the number of complete and operational schemes in the sector has increased by 11% since 2021.
It found that the SFH sector has a further £8bn of unspent capital available to be deployed over the next three to five years by leading investors.
The capital translates into the potential for nearly 30,000 homes to be delivered at today’s values.
The number of complete and operational purpose-built rental properties in SFH schemes stands at 9,466 homes, with a further 9,250 homes either under construction or having received full planning permission, according to Knight Frank.
This takes the total pipeline to nearly 20,000 new homes.
Jack Hutchinson, an associate in the residential investments team at Knight Frank, said: “Despite a growing pipeline, these figures will likely fall short of demand. More than 60% of privately renting households in the UK already live in a house, equating to over three million households.
“While single-family housing delivery is increasing, it accounts for just 11% of the overall BTR delivery to date, and only 0.3% of the total number of privately renting households who live in houses, highlighting the scale of the opportunity.”
For investors already active in the build-to-rent market, delivering SFH provides exposure to different geographies and a diversified demographic, further consolidated by the gap between new tenant demand and supply.
The key investment fundamentals for the SFH market remain strong; tenants tend to be less frequent movers because of their ties to schools, employment hubs and support networks.
A lower turnover of tenants, longer tenancy terms and fewer and shorter void periods all help maintain more secure income streams for investors.
Oliver Knight, head of residential development research at Knight Frank, said: “Growing affordability pressures, the end of Help to Buy and a structural undersupply of homes in the rented market have culminated in significant tailwinds for the private rented sector.
“Consequently, single-family housing is anticipated to play a far more significant role both in housing delivery and institutional real estate portfolios over the coming years.”
Hutchinson added: “Though single-family housing remains in the early stages of its evolution compared with the more mature multifamily market, it is clearly on a rapid growth trajectory.
“The more challenging economic backdrop makes investing in sectors driven by demographic rather than economic shifts a logical one, and there is a huge opportunity for funders and developers to capitalise on solid near-term and projected long-term demographic trends.”
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