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Build-to-rent pipeline hits 250,000, but economy slows delivery
There are quarter of million build-to-rent properties in the pipeline, but “challenging” market conditions have sharply slowed output, a new analysis has revealed.
Research by the British Property Federation (BPF), in partnership with Savills, showed that the total number of build-to-rent homes completed, under construction or in the planning pipeline stands at 253,402 – up 12% in the past 12 months.
The number of homes under construction increased by 9%, buoyed by major house builders agreeing forward funding transactions with investors comprising more than 2,000 homes for rent.
Meanwhile, the number of new build-to-rent homes in the design and planning phase increased 13% to 111,815, the analysis showed.
The research warned that build cost inflation and wider economic uncertainty looked set to slow down delivery, with construction starts totalling 5,549 homes in the first half of the year – down 55% on the same period in 2022.
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In London, where high land values mean schemes are typically larger and more capital intensive, construction starts totalled just 836 homes, down 80% year-on-year.
Build-to-rent, which are purpose built developments for private rent owned by long-term investors, has been a small but steadily growing part of the UK housing market over the past decade.
However, developers have always struggled to compete with the land prices offered by developers building homes for outright sale, who will see much larger profits in the short term.
Ian Fletcher, policy director at the British Property Federation, said: “Build-to-rent is continuing to expand, but the sector is not immune to the current economic uncertainty and cost inflation.
“At the current time, it is very challenging to deliver large-scale capital intensive schemes, particularly in London, but there are fewer obstacles to the delivery of smaller developments in regional cities and single-family housing both which continue to grow as a proportion of housing supply in UK cities.”
Jacqui Daly, director of residential research at Savills, added: “With interest rates now expected to stay higher for longer, demand for new homes for sale is likely to be weaker which will constrain housing delivery.
“Build-to-rent will have a key role to play in maintaining overall housing supply, and in the last quarter we have seen examples of major house builders agreeing to deliver a pipeline of rented homes, which has boosted the pipeline. The continued diversification of the profile of build-to-rent deliverers is critical to its continued growth.”
