UK’s Build-to-Rent sector sees record £832m investment

There are companies out there advertising investment in build-to-rent to give an annual rate of return of 8%. Here’s one example:

https://www.propertyinvestmentsuk.co.uk/build-to-rent/

Consider an average small portfolio landlord holding 1-3 properties outside a limited company whilst earning employment or self-employment income elsewhere who can no longer offset finance costs against rents: Allowing for the increased tax bill at 40% or above, what are the chances of this landlord being able to achieve an 8% return on the landlords funds (as opposed to the capital employed), after tax, without dramatically increasing the tenants’ rents to recover the additional tax imposed?

This is a trend I believe will only continue to accelerate and indicates the significant investment potential of the UK rental market. However, most of this potential can only be realised at large scale far beyond that of the private landlord and this gulf will only widen further. There is a seismic shift underway and a burgeoning BBR sector will drive rents in one direction only.

‘invested into BTR’ does not translate into actual building of BTR – it’s based on profit and ability to max out occupancy levels.

The whole housing market is in ‘“high demand from tenants’ but the fact that ‘One of BTR’s key selling points is the higher standard of service and living it provides compared to the wider private rented market’ means it that only working people on more than average salaries can afford it.

Look at the state of the country! I see no boom times ahead to facilitate an upsurge in this specific demand.

These BTR are NOT going to rent to those on benefits etc and this is where the real need for demand is. PRS rents are NOT affordable to those on low incomes/benefits and this is getting more pronounced by the day – building glass coffins in the sky with pools/gyms etc is not going to make a blinding bit of difference to the homeless stats.

BTR only solves a supply issue for a demand it has responded to by those who can afford a choice of where they live.

Reply to the comment left by Andy at 29/05/2025 – 11:55
also issue is BTR will only offer accommodation to those that have the ability to pay for it.

That rules out all those on current housing lists, homeless, currently in temp accommodation, and the majority of legal migrants coming for work etc – because none can meet affordability criteria.

Labour’s raid on pensions in 1997 encouraged normal people to turn to BTL. This was turbo-charged following the 2008 financial crisis when interest rates collapsed to near zero – free money for those with a half-decent credit score.

What could possible go wrong?

Well, there was the pandemic and war in Europe. Massive quantative easing and huge national debt followed. Interest rates returned to normal levels much faster than most people anticipated.

To fix the economy, without raising interest rates directly, requires smoke and mirrors. Taxing landlords is part of the illusion.

The children of landlords have seen the stress, unfair taxation and over-regulation that there parents suffer. They don’t want to be landlords. This means that landlords
need to sell, or their heirs will. Either way, tenants will make way for owner-occupiers. Those tenants that cannot buy will be condemned to decades in temporary housing. Perhaps mobile homes, caravans and tents.