The landscape of the private rented sector has changed over the past five years. Once dominated by Buy-to-Let landlords, the private rented sector has seen a new status quo emerge, as investor and developer led Build-to-Rent schemes grow in popularity.
Here are some of the reasons why investors should look to the emerging market for purpose-built accommodation:
In 2017/2018 alone output of Build-to-Rent developments increased by 49%, and attracted £2.4 billion in investment. Over the next two years the number of Build-to-Rent units is set to rise to between 10,000 and 15,000. While in the next six, the purpose-built accommodation market is forecast to grow by a further 180%.
Build-to-Rent complexes are a key feature of urban regeneration areas in regional cities outside of London. Cities in the North and the Midlands, especially: Manchester, Newcastle, Birmingham, Sheffield, Leeds, and Liverpool have attracted significant investment. Major attractions of those cities, and others like them, are: employment rates, student retention, rising property prices, good transport links, and high rental yields.
For potential residents there’s a lot to love about purpose-built rental accommodation. Three-year tenancies are the norm, and utilities and amenities costs are all included. Tenants can enjoy a relaxed lifestyle with access to: launderettes, gyms, cafes, cinema rooms, work spaces, and sky lounges; where they can get to know and form bonds with other members of their residential community.
According to research by the British Property Foundation published in 2018, 75% of MPs support Build-to-Rent and its contribution to housing supply. The government established a Build-to-Rent taskforce that introduced a £10 billion housing debt guarantee, specifically for purpose-built rental homes. However, there is still room for more schemes to be opened up to local authorities and developers.
Fast Absorption Rates
Absorption rates for Build-to-Rent complexes can be up to 2.5 times faster than those built for sale. This means that purpose-built rental accommodation is a far better means of accelerating delivery of units at a price suited to the local economy.
By 2025, it’s estimated that 25% of all UK households will live in the private rented sector. The past decade has seen the number of renters rise dramatically, across all age groups (bar the 75+), and the most common PRS households are couples with children. Bild-to-Rent developments offer a possible solution to the UK’s lack of housing stock, providing quality accommodation to the country’s growing tenant population.