UK build-to-rent ─ the future of British property investment?

UK build-to-rent ─ the future of British property investment?

Build-to-rent is the revolution the UK’s PRS needs. So why should investors get excited & where will the best returns be found?

The UK’s private rented sector (PRS) is evolving.

More people want to rent property, but the supply of available real estate cannot keep apace. Britons want increasingly better quality rental accommodation, but what’s available is often dated; unsuitable for the demands of the modern tenant.

It’s a sector with product that can no longer satisfy the end-user ─ tenant expectations have advanced but the PRS has not done so in kind. However, this is now about to be addressed.

A property market that’s changing

Recent hikes to stamp duty land tax (SDLT) thresholds for second homes and buy-to-let properties marked the start of the PRS’ future. It was a move that confirmed what tenants have long held to be true; that buy-to-let is broken, a solution reaching the end of its lifecycle.

In its place will come a new product. One that provides the experience tenants now demand. One that will satisfy the 7.2 million households that will be renting by 2025. One that will boast higher levels of investment longevity for the UK’s property investors.

Build-to-rent is buy-to-let’s natural succession.

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A property solution. An investment opportunity

Unlike its predecessor, with units that were originally intended for the owner-occupied sector, build-to-rent is created solely for the PRS:

  • Purpose-built apartments with the characteristics today’s tenant wants
  • Properties within developments close to the city centre, populated by occupiers that share similar values and interests
  • Homes run by professional on-site management teams.

It’s a sector at the start of a growth cycle. As of December 2015 there were a total of 21,388 build-to-rent units either in operation, planned or in construction across the UK.

With the shift in focus away from buy-to-let, the emphasis on build-to-rent will become even more pronounced; the new number one rental accommodation product.

Build-to-rent is where the UK’s property market changes – the future of rented living.

The 21st century product: The new tenant demands that only build-to-rent can meet

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Rented living is now a conscious life choice for millions of Britons – and build-to-rent is the one product most closely aligned with this ideal:

  • Tenants want easy access to property managers, with maintenance issues resolved quickly. Build-to-rent in-house management teams are based on-site and deliver professional levels of service.
  • Tenants want lifestyle amenities close by, and they want properties designed to the finest specification. Build-to-rent homes incorporate modern 21st century design, while developments come with their own gyms and private and communal living spaces.
  • Tenants want to live in dense urban locations, surrounded by people of similar demographics and who share the same interests. Build-to-rent developments are communities of tenants with shared values, located in the heart of key cities, close to work and social hubs.

“If large-scale rental developments take off, they will partly replace the traditional UK tenancy experience — one of amateur landlords, converted Victorian flats and rising damp — with a more corporate one, offering professional management and services such as gyms, storage and WiFi.” Judith Evans, Financial Times. December 2015.

The £50 billion sector

For 20 years buy-to-let was an asset that addressed the needs of both tenants and investors. Britain’s renters got a place to live, while those looking for a second or future income had the opportunity to invest in a product that would deliver 1,400% in just 18 years.

Build-to-rent retains this legacy and takes it one step further. Tenants don’t just get a roof above their heads, they get a home – their home. And investors get an asset with greater investment longevity than the increasingly tired buy-to-let; an asset in a sector forecast by Knight Frank to be worth £50 billion in just four years’ time.

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Properties in build-to-rent developments will attract huge demand from prospective tenants simply because no other rental accommodation type matches so closely with their lifestyles.

UK buy-to-let is broken ─ and change will be good for investors

Learn more about build-to-rent and the future of rental property investment in the UK with our latest whitepaper – Investing in Manchester: Why is Manchester at the heart of the UK’s build-to-rent revolution?

DOWNLOAD YOUR FREE EDITION OF THE EBOOK:

Investing in Manchester:
Why is Manchester at the heart of the build-to-rent revolution?

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