Will 2021 bring an upsurge in investors targeting Build to Rent?
The UK currently has significant demand for private rented homes. Difficulties getting on to the housing ladder and shifts in consumer habits have led to a decrease in the number of people buying and many more renters looking for somewhere to live. This hasn’t changed during the pandemic – in fact, there are signs that demand may have spiked even more. All of this supports a bright future for Build to Rent and means that those who are looking to invest in 2021 recognise this as a positive sector in which to do it.
The housing market – where are we now?
Renting is an increasingly large proportion of the housing market in the UK. According to the Office for National Statistics, the number of rented properties in the local market doubled over the 10 year period from 2007 to 2017. This increase in demand is being partly driven by the difficulties that many first-time buyers now face if they want to get onto the property ladder. Average house prices have continued to rise and remain unaffordable for those on average salaries, especially if working part time. Consumers are also beginning to move towards a more flexible lifestyle where a permanent address for life is not the objective. All this is contributing to an increased need for rental properties – and for Build to Rent projects.
Build to Rent has had a resilient year
Despite the fluctuations that have affected many areas of the economy – and the housing market – Build to Rent has still shown a lot of resilience over the past 12 months. In fact, the volume of capital committed to this sector in 2020 was £41 billion, up 17% from £35 billion in 2019. This is a sector with a great deal of momentum behind it right now – forecasts indicate that the number of Build to Rent completions will double by 2025, especially if the sector diversifies its London-centric focus.
Big names are already looking to invest
Given the growth in the Build to Rent market it’s probably no surprise that there are already some serious investors lining up to acquire a stake in it. Lloyds Bank, for example, has revealed that one of its objectives is to become a major private landlord. Legal & General was an early adopter in this sector and continues to build on its presence in Build to Rent, announcing a new Suburban Build to Rent business earlier this year. This is likely just the start of the surge of investment that we’re going to see in this industry as 2021 goes on.
Diversifying from the Capital
London currently has the highest volume of Build to Rent properties and this increased 26% in 2020, compared to the previous year. However, consumer property trends are changing with those who have grown up as renters looking to move to more suburban locations to start a family and settle down. The pandemic has driven this further with more people looking to live outside major cities. This opens up many more new opportunities for Build to Rent to expand beyond urban hubs and offer lifestyle choices in a diverse range of locations.
Given the growth in Build to Rent in 2020, and the forecasts already in play for 2021, it’s likely that this sector will attract significant investment over the course of the year.
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