Despite challenging economic conditions, the build-to-rent sector has shown consistent growth over the past year
However, in London, rising building and financing costs are stopping the completion of projects. According to recent research by the British Property Federation (BPF) in collaboration with Savills, the total number of build-to-rent homes either finished or in progress across the UK has risen to 263,694 by the end of Q3 2033, marking an 11% increase from the previous year’s 237,554.
The completed build-to-rent homes saw an 11% increase to 82,660, while units under construction and in planning surged by 12% (52,852 units) and 10% (102,042 units) respectively.
In regional cities, which represent 60% of all completed and upcoming build-to-rent homes, construction activity remained steady, witnessing a 16% year-on-year increase in units under construction (40,231) and 3,339 new starts in Q3 2033.
“With the Bank of England signalling that interest rates are expected to stay higher for longer, demand for homes for sale is likely to remain weaker in the short to mid-term, fuelling demand for build-to-rent,” said Jacqui Daly, director of residential research and consultancy at Savills.
“The sector is expanding beyond the major cities and evolving to offer a wider mix of single-family and multi-family products which will see it become an even more important component of overall housing supply,” she added.
However, in London, mounting building and financing costs have severely impacted larger, more financially intensive build-to-rent projects. New project starts in the city were limited to 434 units in Q3 and 266 units in Q2, with a mere 5% year-on-year increase in units under construction in Q3.
The report revealed a significant increase in build-to-rent development across the UK, with 200 local authorities agreeing to or having projects in the pipeline compared to 100 authorities five years ago. The national planning pipeline remains strong, with 57,214 homes having detailed planning permission and 25,792 homes at the detailed application stage.
“There is huge demand for purpose-designed homes for rent in London and major cities, but the sector is facing significant headwinds in terms of delivery. Uncertainty on inflation and where interest rates will peak is causing projects to stall, particularly in London where developments are typically higher-density and more complex,” commented Ian Fletcher, policy director at BPF.
“However, there are nearly 60,000 homes with a detailed planning application in the sector suggesting market activity could pick up quickly when conditions are right, but policymakers must recognise more support may be required to sustain the growth of the sector in the short-term,” he concluded.
