One of the most salient dynamics of the pandemic in the UK property market has been the surge in demand, stimulated by government measures such as stamp duty land tax (SLDT) holiday and Help-to-Buy (HTB), counterbalanced by Britain’s long-held dearth in housing supply. A key facet of the market, propelling supply, has been the Build to Rent (BTR), sector which was responsible for one in five 2020 homes in London, according to British Property Federation data.

Regionally the volume of BTR even surpassed London, with the UK’s BTR stock now at 53,750 completed homes, with a further 37,000 homes under construction. Simultaneously Savills’ research indicates that Mortgaged Buy-to-Let landlords are withdrawing from the Private Rented Sector (-35,000 redemptions in the year to November 2020) on account of possible tax changes, pandemic related tenant movement trends, and the option to appropriate significant capital gains. As such the opportunity presented by BTR stock continues to appreciate, as an undersupply of rental accommodation is exacerbated by these redemptions.

The average UK house price ended 2020 at a record high of £253,374, according to the Halifax price index. This, alongside altered expectations for living conditions given a series of lockdowns, led many to consider selling their homes and moving. Buy-to-Let landlords, in particular, have exercised this prerogative in the face of rules, introduced in April 2017, which mean that landlords now pay more tax on their rental income. As of April 2020, landlords were unable to deduct mortgage interest payments from rental income before paying tax. This typically entails a net increase in cost. These changes only affect private and individual landlords, hence have created a gap in the market for developers of BTR schemes to service shortfalls in supply whilst demand remains high.

Rental demand growth has been particularly acute in suburban areas, with approximately 2.3 million such households. BTR currently occupies just 1 per cent of this market, according to Savills data, with rapid expansion quickly serving to increase this market share. In 2020, BTR homes under construction increased by 30 per cent in London and 24 per cent outside compared to 2019, and one of the leading demographic cohorts supporting this growth has been renters aged 35 years and over. An English Housing Survey indicates that this group’s numbers have grown fastest, with many viewing renting as a long-term option. Whether it’s due to young families mitigating disruption to child education by restricting moves, or costs of childcare slowing the ability to save for a deposit, such tenants are attracted to suburban BTR schemes that provide green space, quality amenities and facilities.