Escalating prices of private homes lead to a surge in construction of rental properties
The private rental market is set to grow to 22 percent by 2023. High property prices and difficulties saving for a mortgage deposit force many to rent. This has led to a ‘generation rent’ – with millennials being the first generation unable to step on to the property ladder.
Build to Rent (BTR) properties are homes built for renting only and it has become a hot topic in the property industry – and one dubbed as potentially solving the housing crisis – or at least contributing by adding much-needed homes in the UK.
The British Property Federation reported a total of 152,071 BTR properties in the UK at the end of 2019, to include completed projects, those under construction and in planning. The market has seen a 15 percent rise since 2018 and a rise in properties across all development stages:
Properties completed have increased from 30,312 to 40,181 units – a rise of 33 percent.
Properties that are currently under construction have increased from 34,744 to 36,415 units – a rise of 5 percent.
Properties in planning have increased from 66,660 to 75,475 units – a rise of 13 percent.
Nick Biring, Property Expert and Business Partnerships Director at Manor Interiors says: “The BTR market has seen an increase over the past few years as a viable option to renters who want a co-living lifestyle. Looking ahead, I think there will be a rise in BTR family homes and BTR eco-homes that use modern technologies.”
BTR properties come with amenities such as an on-site gym, social activities and concierge services. So not only does it provide more rental housing options, it offers social living – something that’s gaining some traction now.
Social living – or co-living – has become an appealing prospect to tenants. They share living spaces such as a rooftop terrace, gym and swimming pool. But they also share common interests with other like-minded neighbours. So, BTR developments have social activities such as BBQs, movie nights and yoga sessions to get neighbours interacting with each other.
Developments focus on building communities, which also contributes to the loneliness epidemic among young people. 83% of young people aged 18-34 feel lonelier ‘sometimes’, ‘regularly’ or ‘often’. Although they’re connected through social media to people across the world, there’s much less human interaction.
According to Knight Frank, there’s also a demand for rental homes for people over 65. With only a handful of BTR senior living blocks, there’s a hype around future growth. Half of the US senior housing market is in the rental space, so there are opportunities to offer high-quality care and service in buildings suitable for seniors. There are also financial benefits for senior homeowners to rent, allowing them to sell their family home and maximise inheritance tax savings.
Research by Knight Frank identifies five big trends for the private rented sector:
The sector continues to expand: By 2023, it’s expected that an additional 560,000 households will be living in the private rented sector. That takes the total proportion of those renting privately to 22 percent, up from 20.6 percent.
Individual buy to let landlords are exiting the market: Over the last two years, data from mortgage lenders show a decline in new mortgages by individual landlords. Recent changes to tax and legislation have hit landlords financially.
Home ownership declines further: Homeowners with a mortgage continues to decline. But the rate its declining is slowing due to stamp duty incentives for first-time buyers, the Help to Buy scheme and ultra-low mortgage rates.
BTR sector is increasing: There are 40,181 completed BTR properties, with 111,890 properties in the pipeline, showing the increasing supply in the market.
Increase in the provision of social housing: Social/affordable housing is at low levels. Over the next five years, this is set to increase due to new Government funding for social housing, looser lending rules for councils, and increased activity of registered providers in the land market.
Many in the industry are optimistic about the future growth of the BTR market, which is set to grow in 2020 and beyond.
By Bea Patel, Property & Travel Contributor
