There has been something of a hiatus of late in the property industry, as investors and markets take stock of uncertainties both in the UK and further afield. However, data published by the British Property Federation this week has shown the UK build-to-rent sector’s continued ability to counter this cautious sentiment, growing by 20% in the year to the end of September.
There are now 148,046 BTR flats at varying stages of development across the country, which is up by 24,509 flats on last year. This includes a substantial increase in the number of completions, which have grown by almost a third to just under 35,000.
What’s more is that we expect the sector to continue to go from strength to strength, with the pipeline of new projects growing considerably. The number of flats in planning has expanded by 23% over the past year to 77,446, and we predict this will continue to grow as the sector matures.
Growing confidence
BTR is well liked by tenants and is proving popular with many local communities. When this is combined with a strong investment proposition, it is perhaps unsurprising that investor confidence in the sector is high.
Size increasingly matters, demonstrated by our figures that show the average size of planned BTR schemes is almost 200 flats higher than those that have been completed. Scale, and how to achieve an investment portfolio in good time, has always been one of the challenges for investors in the sector. With size also comes management efficiency.
BTR is no longer just a London success story, and our data shows growth of the sector was spread relatively evenly between London and the regions in Q3 2019. And while the pipeline of BTR flats in the capital is marginally higher than outside London (at 63,200 and 60,337 respectively), the growth in completed flats outside of London was considerably higher at 41% over the year to Q3.
Maintaining momentum
The sector still faces headwinds, though. At a local level, it remains hard work trying to explain what the sector is and how it can help a range of people who need to, or want to, rent.
Our polarised politics is in danger of forgetting those in the middle, who can neither buy nor access government support. However, there are more bows to BTR’s fiddle than merely adding to supply. The sector is also delivering a quality product and quality service, and hopefully as more flats come on stream and more appear, it will illustrate what the sector can offer.
As councils increasingly grapple with their housing numbers and the Housing Delivery Test, the sector’s ability to deliver may also come more to the fore.
Rent controls remain another potential hurdle to investment, with several proposals for rent caps circulating in the UK. Whether these come to anything is still very much up in the air, but uncertainty itself is unhelpful. The sector has never had a problem of voluntarily providing some rent certainty during the tenancy, capping to an index, but rent control is politically expedient and therefore, however unhelpful, likely to remain a talking point for the foreseeable future.
Nevertheless, investment in housing is desperately needed, and demographics and the changing ways that we choose to live point to a bright future for high-quality, institutionally managed rental properties. Our recent data points to a sector that continues to thrive, but we cannot lose sight of the continued need to promote the sector to policy makers and communities alike, and create the conditions that will lead to its long-term success.
Ian Fletcher is director of real estate policy at the British Property Federation
