Build-to-Rent Sector Predicted to Expand

The build-to-rent sector (BTR) is predicted to expand during the next few years, in spite of the oncoming economic downturn. Letting Agent Today reports that investment in BTR is up by £600 million compared to the same time last year. The rental market is attractive to investors, because there is a strong demand and a shortage of supply.

BTR is a fast-growing market within the private rented sector which provides purpose-built rental accommodation. The houses are built to a high standard, close to a good range of amenities, and are professionally managed. Recent months have already seen extensive new BTR investments in cities including Bath, Bristol, and Cardiff. 

Developers are now recognising that private renting is becoming a more common lifestyle choice across all age groups in the UK, and this is likely to increase as house prices have recently soared, and mortgage rates are also rising. This makes BTR an attractive long-term investment.

BTR homes also appeal to tenants, because they are designed around purpose-built communities. They are often more than just a roof over the head; they have communal areas, gyms, restaurants, and good access to local amenities and transport links in areas with high employment. 

This type of housing appeals across a broad range of the market; not just to the traditional young professionals, but families, older people who want modern urban living without the responsibility and burden of home ownership. 

A BTR consultant told Letting Agent Today: “Build To Rent has attracted a lot of investment so far in 2022, from existing and new institutional investors. It is inevitable that the wider economic uncertainty, as well as construction costs and debt will impact investment volumes over the coming months.”

They added: “Still, with a chronic shortage of homes to rent in the UK and a growing number of renters, the market offers buckets of long-term potential and has a track-record of performing well in economic downturns.”

The other factor which may be driving the BTR sector is the steep rise in mortgage costs, which it is feared will lead many private landlords to sell up when their current fixed term contracts come to an end, as Landlord Today recently reported. 

Although there is high demand for rental properties, the ongoing financial crisis may mean that some tenants are missing rental payments, and rental income is less reliable than it was. 

The consultant commented: “Rising living costs is putting huge financial strain on some UK renters, compounded by the longstanding imbalance between supply and demand which continues to drive rental growth. BTR is poised to plug some of the rental supply gap, which has been worsened by private landlords exiting the market.”

As landlords can no longer offset higher interest payments against tax, and stricter energy efficiency standards come into force, there is more pressure on private landlords, and less favourable market conditions than there has been for some time.

If you are a landlord and looking for advice and require a mortgage advisor, contact Tulip Mortgages today who can help with all things property and mortgage!