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New-Build Investment Creating New Rental Markets in Cities

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    New-Builds Are Creating Rental Markets With Average Rents Over £1,000

    The latest Zoopla Rental Market Report reveals that over 90,000 new built-to-rent homes have been constructed across the UK in recent years, leading to the emergence of new rental markets in city centres.

    Data indicates that one-fifth of rented homes in Scotland, the North West, East Midlands, and West Midlands now have average rents exceeding £1,000 per month. Three years ago, no areas outside of the South of England had average rents surpassing this threshold, indicating significant growth in traditionally more affordable regions across the UK.

    The North East remains the only region without rental markets exceeding £1,000 per month, while 4% of areas in Yorkshire and the Humber have rents above this price point.

    Additionally, housebuilders are beginning to sell new-build homes to corporate landlords.

    So, is it worth considering new-build buy-to-let property investments?

    Find Out More: Interested in build-tor-rent investment? Check out our guides on new-builds in Wrexham and new-builds in Dewsbury.

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      How Does the Build-to-Rent Market Look in the UK?

      The figures from Zoopla follow numerous other reports of a thriving build-to-rent sector in the UK property market.

      Foxtons’ analysis of annual build-to-rent completions, tracing from 2018 to 2023, reveals significant growth in this sector within the Private Rented Sector (PRS).

      Initially accounting for a mere 0.6% of the 5.5 million privately rented homes in 2018, build-to-rent completions surged to 58,844 units in 2020, exceeding 1% of the total private rental market for the first time.

      By 2023, this figure rose to 100,372 units, marking a remarkable 69% increase since 2013. In contrast, the overall PRS stock saw a mere 3% rise during the same period. Build-to-rent units account for 1.8% of the entire private rental market, the highest proportion since 2018.

      In London, build-to-rent completions also experienced substantial growth, climbing from 1.8% of the capital’s PRS stock in 2018 to 4.2% by 2023, representing a 61% increase.

      The recent Savills English Housing Supply Update indicated that build-to-rent completions surpassed 100,000 units in 2023, a 57% increase from the previous year.

      Moreover, significant investments, totalling £4.6bn in 2023 (per Knight Frank), demonstrate investor confidence in the UK build-to-rent market, spurred by rental growth due to supply constraints. Knight Frank suggests urgency among investors to capitalise on build-to-rent properties as part of their investment strategy.

      With numerous developments in the pipeline, the trajectory suggests continued growth in this sector.

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      So, Are City Centres Worth Considering for Property Investment?

      With build-to-rents creating new markets in city centres, investors would do well to look at the UK’s top cities for investment opportunities.

      As office work resumes, research from Shawbrook Bank indicates landlords are increasingly investing in urban flats, reflecting a trend among tenants leaning towards city living. In the UK, 28% of landlords found city flats lucrative in the past year, with 26% foreseeing continued profitability.

      With 43% of employees returning to offices, landlords recognise the investment potential in city properties. In London, 30% of landlords prefer city flats, reflecting a 13% job growth since 2019. In Scotland and Wales, 39% and 28% of landlords prioritise city centre apartments.

      With build-to-rent properties going up in the UK’s cities, it seems landlords will have more opportunities to invest in state-of-the-art properties that appeal to young professionals and similar demographics in the near future.

      Find Out More: Learn more about UK property investment with our guide on how to make money from real estate.

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      Author

      Dale Barham

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      Dale is a property news and onsite content writer at RWinvest.

      Landlord News, New-Build Investment, UK