The Build to Rent development pipeline has grown dramatically in recent years and there are clear signs of the sector becoming a mainstream asset class that could fill a major gap left by the recent surge in the number of landlords exiting the market due to greater pressure from tax and legislative changes, according to Apropos by DJ Alexander.
The property management firm believes that the surge in operational Build to Rent stock over the past 12 months, along with the amount under construction, means that the sector is now well placed to provide one of the solutions to the declining number of landlords in the PRS.
The latest figures from CBRE show that there has been a 20% increase year-on-year in the amount invested in institutional investment into the UK’s Build to Rent for the first half of 2019.
Despite the increase, Built to Rent currently comprises less than 1% of the total value of the UK’s private rented housing stock. However, with landlords being financially squeezed at every stage from buying, renting to selling in the PRS market there is an opportunity for large scale investors to replace this market.
The British Property Federation report that there are 142,999 Built to Rent units either completed or planned in the UK, comprising 32,223 completed, 36,410 under construction, and 74,366 with planning permission.
David Alexander, joint managing director of Apropos by DJ Alexander Ltd, commented: “Although it is still early days for the Built to Rent market it is clear that it is attractive to major institutional investors such as Legal and General, Aberdeen Standard, Goldman Sachs and others. These companies see the investment benefit while the government understands the need to quickly deliver large numbers of rental properties over a short time frame to meet the current and future demand caused both by landlords exiting and the growing UK population.”
“Even ambitious social housing targets of 100,000 new homes a year will not meet the growing demand within the rental market and Build to Rent is providing a very effective, quick and targeted response which is able to produce quality homes, at affordable prices in key areas.”
Alexander added: “Built to Rent, retirement living developments and purpose-built student accommodation (PBSA) are the three areas which are currently driving the private rented sector. The PRS has traditionally utilised properties which were built to be sold. Adapting such properties to a long-term rental market can work but not all developments are as sympathetic as they could be.”
“The advantage with Built to Rent is that you can create homes which are ideal for long term renters and create homes which are designed and developed with one aim in mind: to develop properties directly suited to a specific market. This creates more appropriate, bespoke homes able to fulfil the long-term needs of renters.”
He continued “The PRS has grown significantly over the last 20 years and the market has often been too slow to respond to changing demands. It has also often reacted in an ad hoc way to the challenges presented by the market which has not always been as appropriate as it could be for the increasing numbers of individuals choosing to live in rented accommodation for longer periods.
“Built to Rent offers one solution to this complex situation and I welcome its adoption both within national and local governments and among institutional investors in providing a welcome and timely response to a growing demand from diverse communities across the UK.”