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UK Build to Rent sector offers plenty of growth for investors in 2022 and beyond

By Surrenden Invest | April 27, 2022
While an overall undersupply of property across the country is not breaking news, the most recent UK Build to Rent report from Savills has emphasised the shortage of rental stock as an opportunity for Build to Rent developers and investors.
According to the report, almost every local authority nationwide requires an increase in the supply of rental property, which has caused the cost of renting to jump in recent months. In 2021, the average annual rental growth rate increased by 8.3% across the UK, with a lack of stock and rising demand driving rents upward.

230,000

230,000 new rental homes are required across the UK per year to avoid a shortfall.

76%

76% of local councils have seen an increase in property investors converting residential BTL into Airbnb lets.

£4bn

Around £4 billion was invested in the Build to Rent sector in 2021.

227,000

227,000 rental homes required per year to house renters across Britain.

Gap between supply and demand widening

According to Capital Economics, almost 230,000 new rental homes are required across the UK per year to avoid a shortfall caused by the expected creation of 1.8 million new households over the next decade.
However, despite the large volume of rental property needed, UK Finance has reported a decrease in the number of available properties within the Buy-to-Let sector, with BTL mortgage redemptions increasing by 28,000 year-on-year, suggesting more landlords are selling up and exiting the market. Rising house prices are one reason for landlords offloading rental property assets, with some seeing market conditions as an opportunity to maximise equity gains as a key motivator.
However, indirectly, tax and regulation changes introduced by the UK government to improve market conditions for first-time buyers may have intensified the shortfall of rental properties, with some landlords turning away from the sector altogether due to affordability issues.
What’s more, the effects of the Covid-19 pandemic have shifted the market considerably, sparking a rise in the popularity of staycations and short term lets. Around 76% of local councils have seen an increase in property investors converting residential BTL into Airbnb lets, intensifying supply issues in areas already struggling with the availability of rental stock.
These factors are just some of the reasons why the number of rental properties provided by the Buy-to-Let sector is declining, which has fuelled a rise in renting costs.

Bridging the supply gap

For property investors and landlords, the scope for new-build rental properties to enter the rental market is one of the biggest takeaways from the Savills report. With a national fall in rental homes, the UK Build to Rent sector has offered encouraging signs for property investors to secure robust returns from Buy-to-Let property.
The report revealed that around £4 billion was invested in the Build to Rent sector in 2021 and, according to Savills, completed and pipeline projects Build to Rent stock accounts for 212,200 homes across the nation. However, compared to the reported 227,000 rental homes required per year to house renters across Britain, there is an apparent disparity between new stock entering the market and the creation of new households.
According to the listings portal Rightmove, the North East of England has seen the most significant decline in rental stock, with the number of available properties to rent 50% lower than the 2017-2019 average. Property investors looking for Build to Rent opportunities in the North East are likely to achieve some of the best capital gains on the market, with values expected to climb by 18.8% over the next five years.
Apartments in Surrenden Invest’s The Bank development in Hull are an excellent example of high-quality Build to Rent stock and offer investors a significant growth potential while addressing the overall shortage of rental property in the city.

What is Build to Rent and how does it work?

Build to Rent is a term coined for property design and developed to appeal to the needs of tenants rather than owner-occupiers. The UK’s Build to Rent sector has seen a steady and rapid rise over the last ten years, emerging as a viable way for developers and investors to provide high-quality, purpose-built accommodation, often in city centre locations for renters on the local market.
Each development is designed with the local property market in mind and often features desirable on-site facilities, including management and concierge, plus enhanced security features, including CCTV and fob lock entry systems. In larger Build to Rent developments, residents have access to hotel-style facilities such as a gym, communal spaces, and practical amenities such as bike storage, parking, and even storage space.
The Build to Rent market can cater to long-term and short-term tenancies and provides higher-quality rental accommodation.

What are the benefits of Build to Rent?

For tenants, one of the biggest benefits of the UK’s Build to Rent market is the value on offer, with end-users reportedly enjoying the lifestyle improvements provided by access to on-site facilities and management teams. The inclusion of some bills within the cost of renting is also deemed a positive by tenants, according to the latest findings of a HomeViews survey.
Overall, the UK Build to Rent sector has helped the quality of rental property stock increase, with tenants able to rent an apartment with high-end fixtures and furnishings that reflect their aspirations and lifestyle. The location of Build to Rent stock is also one of the most attractive pulls for renters, opening up city or town centre housing options for those who would not be able to buy in the same area.
According to Knight Frank, the Covid-19 pandemic has highlighted the importance of the Build to Rent sector and the ‘benefits of purpose-built, flexible, actively-managed accommodation’. With more people assessing what they need from their rental accommodation, the Build to Rent sector is in an excellent position to bridge the gap between supply and demand.
Investors early to adopt the Build to Rent model have benefitted from a steady tenant demand. With an on-site management or maintenance team in most locations, investors enjoy hassle-free rental property ownership as each development is fully managed. What’s more, the high quality of new build projects often means that investors secure high-calibre tenants.

The best locations for BTR property

As with all property investment purchases, purchasing an asset in the right location with a strong demand for the type of accommodation provided is vital. Location is a significant factor for renters, which is often why Built to Rent developments are situated in city or town centres where space for new-build property is at a premium.
Investors must consider the type of tenant their property will appeal to and factor employment prospects, connectivity, and access to amenities into their research alongside determining average rents, void periods, and the most desirable types of properties required on the local market. As experts in our field, Surrenden Invest conducts extensive research into each market we operate to take the hassle out of researching hotspots for Buy-to-Let investments.
For more information about the best locations to invest in the Built to Rent property sector, visit the City Guide section of the Surrenden Invest website. You will find out the latest range of downloadable PDFs that contain everything you need to know about the UK’s best-performing markets.

How to invest in Built to Rent property

The UK’s Build to Rent sector has plenty to offer property investors. However, for buyers considering an off-plan property within this market segment, it is vital to ensure that you invest in a project delivered by a reputable developer with an extensive track record.
To help you navigate the options available for investment, Surrenden Invest specialises in income-generating Built to Rent investments and has established relationships with leading developers operating in the market.
Our unrivalled UK property market experience and strict due diligence process ensure that we only promote reputable developments located in areas with an established demand for Buy-to-Let property.

For more information about investing in UK Built to Rent, contact Surrenden Invest today or visit our developments page to view our latest available properties for sale.

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