Property investors looking for new build development opportunities in the UK will be encouraged by the trends highlighted in recent research from some of the most authoritative names in the industry.
Studies have shown clear growth in both the private rented sector (PRS) and the build-to-rent market, which made strong starts to 2019.
PRS investment tops £1bn
The latest UK Residential Investment report from CBRE revealed £1.04 billion of institutional investment into Britain’s private rental property market in the first quarter of 2019, a fourfold increase on the same period a year earlier. The latest figure is among the strongest quarterly investment volumes recorded since 2015.
CBRE described it as a “positive start to 2019”, adding that it illustrates “continued strong appetite for the sector”. UK residential property, particularly in the private rented segment, clearly still holds powerful appeal for investors, despite external challenges such as the ongoing uncertainty around Brexit.
Furthermore, the study noted that investment data suggested “strong momentum” going into Q2, with almost £780 million of transactions under offer, broadly split between London and the rest of the UK.
Britain is desperately in need of new build developments to meet demand from buyers and private tenants. As far as development is concerned, figures from the British Property Federation (BPF) revealed that institutional investment into the PRS has delivered more than 140,000 homes across the UK, which are either completed or in the pipeline. The figure marks an increase of one per cent, or 1,981 properties, from Q4 2018.
There were 1,231 housing starts in the first quarter of 2019 – all of which were outside London – meaning there are now almost 38,000 new rental homes under construction across the UK.
CBRE’s insights into positive trends in the PRS are in line with indicators of performance in another key part of the modern British property industry – the build-to-rent (BTR) sector.
The key role of BTR
The Build to Rent Report 2019 from law firm Addleshaw Goddard, in association with the BPF, Savills and Turley, revealed estimates that the pipeline of new BTR homes has now grown to 132,000 properties – more than eight times the figure recorded only three years ago. Furthermore, the market’s geographical spread is far wider than ever before, with new developments emerging all over the UK.
Hamish Simmie, research analyst at Savills, commented on these key trends in the BTR sector.
“The BTR sector in the UK is growing, both in numbers of units and in the size of schemes – planned, under construction and completed – and also in its geographical spread,” he said. “With growing investor confidence in the sector, schemes are getting larger. Of those that have been completed to date, just under half of the schemes have 100 units or more.”
The research also highlighted the appeal of BTR properties to millennials, a generation that accounts for 14 per cent of the UK population and up to 35 per cent of the workforce. With housing costs prohibitively high for many, renting is the most common living option for this generation, with 59 per cent of 25 to 34-year-olds living in rented property.
New build development opportunities
BTR homes are an increasingly attractive option for many millennials, thanks to benefits such as guaranteed housing standards and secure tenancies.
Amber Morley, economics consultant at Turley, a development consultancy, said: “As a millennial, I remain an optimist; I believe BTR has an important role to play in meeting this generation’s demand for high-quality, safe and well-designed homes.”
Earlier research by the BPF also provided evidence of the growth taking place in BTR, with the number of homes under construction in this market increasing by nearly 40 per cent.
Ian Fletcher, director of real estate policy at the federation, said the revised National Planning Policy Framework, which asks local authorities to identify how many new rental homes their respective areas need, will help to ensure the BTR sector has a bright future.
The encouraging trends that have helped to define Britain’s private rented sector so far in 2019 make it clear there are many new build development opportunities on offer to investors interested in UK property.
With many regional destinations currently witnessing strong growth and various alternative asset classes to choose from, including student accommodation and hotel suites, the market is more diverse than ever before.