The latest reports from the UK Build to Rent (BtR) sector, released in January/February this year, were full of headlines that 2023 saw near record investment of £4.5bn into the BtR sector, ‘the second highest year on record’. The Q4 2023 Build to Rent Market Update by Savills added that 2023 was second only to 2022, when investment was £100m higher.
With rising interest rates, continued material and labour-cost inflation, plus a looming election in the UK, this level of investment certainly sounds impressive. However, less than 19% of the £4.5bn invested last year (£850m) was spent on purchasing ‘standing assets’, which it would be fair to assume were existing BtR units, or commercial properties that could be converted into BtR homes.
This means that over 80% of all investment into BtR last year can be parked in the ‘one day in the future’ area of the pipeline, which will need to overcome continued obstacles, most of which are created by our wonderful Planning Inspectorate, as a large percentage of planning applications for BtR end up going through the appeals process.
We will look at planning later in this article but for now let’s focus on what Savills is forecasting for the BtR supply pipeline. It says that London and the core cities will dominate the supply pipeline over the next five years and in the five years after that ‘more completions will be concentrated in Build to Rent apartments in the rest of UK and Build to Rent houses in suburban locations.’
When looking at the numbers, Savills projects that 360,000 BtR homes will be completed by 2033, up from the 100,000 competed at the end of February 2024. It adds: ‘This is calculated through the short-term planning pipeline (2023-2025) and projected growth rates for the years 2026 to 2033.’
This forecast equates to around 26,000 new homes per year being completed over the next 10 years, which, as a best case scenario, would still only satisfy 8-9% of the 300,000 new homes that the UK needs every year, according to government estimates. Nearly all of the 100,000 current BtR units were completed in the past ten years, from 2014 to 2023, so 10,000 units per year on average, but developers were benefitting from a UK base rate of less than 1% for more than eight those ten years. There was also a plentiful supply of EU construction workers for the majority of those years, but many of them have now left the UK.
