Build to Rent sees £800 million investment surge

Build to Rent sees £800 million investment surge

0:02 AM, 31st October 2024, About A week ago 6

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The Build to Rent sector has attracted a staggering £800 million in investment during the third quarter of 2024.

Savills says the surge in investment is being fuelled by both bulk and single site transactions, as investors aim to establish essential operational infrastructure.

Bulk deal investments reached £1.2 billion in the year leading up to Q3 2024, accounting for half of the total £2.4 billion invested in the single-family home (SFH) sector.

Meanwhile, single-site schemes also experienced significant growth, increasing from £0.27 billion to £1.2 billion.

Viability remains a hurdle

Guy Whittaker, head of UK BTR research at Savills, said: “The rapid growth of single site transactions alongside bulk deals shows that the recent rise in investment is a longer-term trend, rather than just a reaction to a softer sales market.

“Viability remains a hurdle in the current climate, with elevated debt and construction costs, as does the planning system, particularly in London.

“If these obstacles can be navigated, there is no shortage of investor demand to deliver new homes for rent, with more and more investors reallocating capital from other commercial real estate sectors into living.”

Construction pipeline has shrunk

Savills reports that sales to homeowners and buy-to-let investors are slowing down, and institutions are jumping at the chance to enter the market.

House builders are changing their business models and teaming up with the private rented sector (PRS) to show their long-term commitment to single-family homes (SFH).

This shift comes as sales rates, once supported by the Help to Buy scheme, may not return to previous levels.

The construction pipeline has shrunk by 20% in the last year, and there are signs of contraction in the wider private rented sector. Savills points out that Build to Rent (BTR) investment is key to replacing lost rental supply with high-quality, efficient homes.


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Mr Blueberry

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16:04 PM, 31st October 2024, About A week ago

The problem with BTR is their target buyers aren't families most in need, i.e. families on working class salaries or no salaries at all.

The large BTR investors are looking at middle-class professionals with only a token smattering of riskier tenants. Investors want their money back in dividends and some more!

Will the government achieve their target of 1,500,000 new homes during their 5year term in office? That's over 850 homes a day.

Around 234,000 homes were built last year but very few were affordable homes or social housing. This is the rub... anyone can build BTR homes when the target family is middle class, oodles of money and can pay the rent. But who's building the BTR homes to rent out more cheaply for the millions of people on low salaries?

Reluctant Landlord

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16:57 PM, 31st October 2024, About A week ago

BTR tend to also be pile 'em high, glass boxes in the sky, based in cities or commutable areas (or above shops - NB Waitrose/J Lewis!). Cheaper and quicker to build en mass and single tenants on tap with decent jobs to pay for them.
Build in areas where families actually want to be (and can afford!) and there is the issue of planning, objections, CIL considerations, delays. More time, more effort and less profit.
Those dependant on LHA, have a low wage, families, pensioners, newly granted asylum seekers etc are NOT their target market....yet all these people still need housing....

Stella

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17:15 PM, 31st October 2024, About A week ago

I have heard that Labour want developers to have 50% affordable homes as part of their developments.
I dont think many developers will like this idea and I wonder if this will have a knock on effect on the rate of development.
I may be wrong but I did hear somewhere that some BTR developments are earmarked for social housing.

Reluctant Landlord

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11:00 AM, 1st November 2024, About A week ago

Reply to the comment left by Stella at 31/10/2024 - 17:15
affordable or social homes can only be provided as part of the deal with planning/local council to get a development underway, IF the cost of the remaining homes to sell is increased to match the amount the affordable or social home is subsidised by.

A developer is not going to build anything at a loss.

There are many developments that have now stalled because the cost of supplies and labour has increased to the point the cannot simply add the cost on to the properties they are looking to sell on the development as people wont buy them.

In my area the developer has gone back to the council. The council has then reduced the number of affordable/social allocations, just to get the development completed asap. Net loss of the number of affordable/social homes to then rent, but at least there is something they can release because the development can be finished off.

In the current climate (and post this budget) I see no developer rushing to start anything new.

Stella

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11:36 AM, 1st November 2024, About A week ago

Reply to the comment left by Reluctant Landlord at 01/11/2024 - 11:00I agree
One of Sadiq Khan's bright ideas for London is to get developers to build 50% of new developments as affordable to help solve the housing problem.
The new developments in the Olympic Park which have been built to date should have had 40% affordable housing but apparently only 24% are affordable.

Khan might have to modify his expectations!

Lisa008

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12:30 PM, 3rd November 2024, About 5 days ago

The idea of 'affordable homes' has always seems like a bit of a joke to me... "affordable" to whom??!! has always been my question!

No private developer is a charity. And the government should take the responsibility for building, as they sold off the family china (the countries assets) for cheap in 'right to buy' deals, so subsidise the developers and get this thing moving. I just don't understand? How can China, Spain and Dubai look like and be a constant building site, yet the UK can't pull its finger out? Sheer incompetence or just lack of willingness? or both? I've never been able to decide...

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