The Build to Rent (BTR) sector of the UK property market is experiencing record levels of investments because of a combination of factors. Rental values are bouncing back steeply post pandemic while there have been market shifts in lifestyle trends prioritising new ways of living.. A significant ongoing, and longstanding, imbalance between the shortage in supply of homes and growing demand for houses is propelling exceptional investment opportunities in the British residential property sector.
As of the first half of 2021, the UK’s BTR sector took in a record £2.35 billion in investment capital, according to Knight Frank data. This is representative of a 79.8 per cent increase in capital deployment volumes relative to 2020 at this stage. Split across two consecutive quarters of robust forward-funding, domestic and international investment, the sector has been buoyed by over 96 per cent rental collection rates so far in 2021.
The property investment landscape is increasingly characterised by diversification of portfolios to manage risk, particularly to mitigate downside exposure to the as yet undefined future of commercial and retail space. Moreover, investor demand is evenly balanced across the country given 70 per cent of fund commitments over the first two quarters of 2021 were for developments outside of London.
The universality of themes such as the search for both indoor and outdoor space plus more energy efficient and sustainable design architecture has led to the RICS national tenant demand survey’s highest readings since it began in 1998. Simultaneously, housing supply remains constrained and the Bank of England suggestion of raising interest rates in 2022 means access to such low cost capital is now temporally limited.
As such, 2021 UK’s BTR investment volumes look exceedingly likely to eclipse the record £3.7 billion invested in 2020. Resilient income generating residential assets in safe locations are evincing interest from global investors, with Knight Frank research indicating over 60 per cent of funds deployed in the first half of the year came from outside the UK.
The latest ONS rental index suggests annual rental change across England stands at +1.1%. This increases to +1.7% if London is excluded from the figures, where rising supply has put pressure on rents. That said, as travel restrictions are eased as the year progresses and offices and amenities start to re-open, this will underpin a in the capital.