Build-to-Rent Topped UK Property Investment Strategies Last Year

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Why Was Build-to-Rent So Strong in 2023?

The UK build-to-rent sector offers a promising avenue for future growth, as revealed by recent research showcasing a fantastic year for build-to-rent property investment in the UK.

Rental demand remains exceptionally high nationwide, driving investor support for purpose-built rental accommodations.

Build-to-rent primarily features new apartments or houses strategically located in city centres or near transportation hubs, meeting the evolving demands of modern tenants. Typically, such developments include extras like gym or spa facilities, concierge services, and communal areas, further aiding desirability.

Often, these properties can be bought off-plan, which involves buying directly from the developer for a discounted price before construction is finished.

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How Did the Build-to-Rent Sector Perform Last Year?

According to the latest Savills research, the build-to-rent sector, alongside affordable housing, demonstrated the most substantial growth in new developments throughout 2023. The Q4 English Housing Supply Update shows that the industry surpassed 100,000 completions by the end of the previous year.

Notably, completions saw a remarkable 57% increase compared to 2022, driven by the delivery of flatted schemes in regional cities. While statistics remained 26% below the 2017-19 average, the sector anticipates sustained delivery, thanks to a substantial existing pipeline.

Elsewhere, a Knight Frank report highlights the record-breaking performance of the UK build-to-rent sector in 2023, surpassing overall housing market growth. Investors allocated £4.6bn to UK build-to-rent assets last year, with £1.9bn in the final quarter alone. This underscores sustained investor confidence in the UK rental sector, addressing the high demand for rental homes.

While 53% of total investments were from UK investors, North America dominated foreign investments with 38%, while Asia Pacific contributed 7%.

Find Out More: Want to know how to make money from property when you’re from overseas? Check out our guide on how to buy property in the UK as a foreigner.

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Is Demand High in the Rental Sector?

Over the last few years, the UK has endured high-interest rates, rising inflation, and skyrocketing mortgages and energy bills. This cost-of-living crisis meant more people looked for rental accommodation as they could not commit to the elevated mortgage prices.

In addition, the housing supply is still down, particularly in the private rented sector. This has forced rental prices up, which benefits buy-to-let investors, mainly if they can purchase a property mortgage-free.

The demand for rental housing is expected to stay strong. Savills’ research predicts that the number of households in the private rented sector will increase by 800,000-1,000,000 by 2031. Currently, there are roughly 4.6 million households in this sector.

This indicates that there will be a continued high demand for accommodation in both build-to-rent and traditional buy-to-let. Purpose-built rental homes will likely become increasingly popular among investors and tenants in the coming years.

If you are a property investor, you may want to keep an eye on the best areas for rental yields if you want to invest in the build-to-rent sector. For instance, the North West buy-to-let returns could reach 9.2% in 2024, indicating strong rental demand and good return potential on property investments in this region.

Explore the UK rental market with our updated investment area guides:

Build-to-Rent Topped UK Property Investment Strategies Last Year