There is a growing appetite among property investors in the UK for putting money into projects building homes specifically for use in the rental market, according to the latest report released this week by Knight Frank.
The build-to-let market in the UK is currently very small, the consultancy said, with only around 14,000 of the 26.7 million properties in the UK falling into this category. However, with the growing demand from tenants amid an increase in the so-called generation rent, more investment is set to come into this area of the rental sector over the next few years.
So far, Knight Frank said investors across the nation have put £15 billion into the build-to-let market, but this is set to see rapid growth in the next five years. By 2020, the company said that some £50 billion will be invested in these types of property development.
Knight Frank believes this need for more money for specially built rental properties is being fuelled by a “structural shift” towards renting among young people in the UK. This includes those who cannot afford to buy their own home, and others who choose to rent for the convenience it gives them, one expert added.
“There are profound demographic and lifestyle changes apparent in the UK,” said Chris Taylor, chief executive of Hermes Investment Management’s real estate arm and president of the British Property Federation.
“Young people want to live, work and play in cities, and the fact of the matter is that housing is not accessible or affordable to them.”
Build-to-let could be focussed mainly in big cities when it comes to the development of these investments, with urban residents much more likely to be looking for high quality new rental properties. And while London will be popular with investors, it’s also likely that thriving northern cities such as Manchester and Leeds could see a swell in rental-specific development across the next few years.