Build-to-Rent sector grows 11% year-on-year but economic headwinds stall construction in London
- Total number of homes completed and in the pipeline across the UK increases 11% y-o-y to more than 263,000
- However, sharp increase in build and financing costs impacting delivery, particularly in London
- Total construction starts in London total just 434 units in Q3 2023
Despite challenging economic conditions the Build-to-Rent (“BtR”) sector continued to expand in the past twelve months but sharp increases in build and financing costs are stalling delivery in London, according to new research by the British Property Federation (“BPF”).
The analysis, conducted in partnership with Savills, shows that the total number of BtR homes completed or in the pipeline across the UK rose to 263,694 at the end of Q3 2033, up 11% year-on-year (from 237,554).
The number of completed homes increased by 11% to 82,660 while the number of units under construction and in planning increased by 12% (to 52,852) and 10% (to 102,042) respectively.
In regional cities, which account for 60% of all completed and pipeline BtR homes, activity remained relatively robust with the number of units under construction increasing by 16% y-o-y (to 40,231) and new starts in Q3 2023 totalling 3,339 units.
Meanwhile in London, increases in build and financing costs are having a severe impact on the delivery of larger, more capital-intensive schemes. New starts in the capital totalled just 434 units in Q3, and 266 units in Q2. Units under construction increased just 5% y-o-y in Q3.
The report also highlights that 200 local authorities have now consented BTR developments or have schemes in the pipeline, up from 100 authorities five years ago, underlining the rapid growth of the sector across the UK. The national planning pipeline remains robust, with 57,214 homes with detailed planning permission, and 25,792 homes at detailed application stage.
Ian Fletcher, Policy Director, British Property Federation, said: “There is huge demand for purpose-designed homes for rent in London and major cities, but the sector is facing significant headwinds in terms of delivery. Uncertainty on inflation and where interest rates will peak is causing projects to stall, particularly in London where developments are typically higher-density and more complex. However, there are nearly 60,000 homes with a detailed planning application in the sector suggesting market activity could pick up quickly when conditions are right, but policymakers must recognise more support may be required to sustain the growth of the sector in the short-term.”
Jacqui Daly, Director, Residential Research and Consultancy, Savills commented: “With the Bank of England signalling that interest rates are now expected to stay higher for longer, demand for homes for sale is likely to remain weaker in the short to mid-term further fuelling demand for Build-to-Rent. The sector is expanding beyond the major cities and evolving to offer a wider mix of single-family and multi-family products which will see it become an even more important component of overall housing supply.”
You can view the full Q3 2023 report here.