BTR boom continues – new builds command 23% rental premium

New-build homes command rental premiums of as high as 41% in the current market as the Build to Rent (BTR) boom continues to entice investors away from traditional buy-to-let avenues.

Property platform Unlatch analysed market data on new-build rental premiums and yields and how they differ across the UK.

Figures show the new-build market is thriving, driven by the evolution of the BTR proposition which offers tenants high-quality rental property with modern-day amenities that appeal to today’s renters.

In fact, the number of Build-to-Rent developments under construction has increased by 8% in the last year alone, while completions have also soared by 26% during the same period. 

With new-build homes offering a far higher level of quality, it’s no surprise that they command a higher rental value when reaching the market. 

The research by Unlatch shows that across Britain, the average rental value of a new-build property sits 23% higher than existing homes in the market. 

This premium is at its highest in Scotland, where new homes command 41% more in rental income, while the North East (33%), Wales (29%), South East (28%) and East Midlands (27%) also rank amongst the regions with the highest new-build rental premiums.

However, It’s the North West that is currently home to the highest average new-build rental yield at 4.4%, some way above the national average of 3.7%. 

Where yields are concerned, Scotland again ranks high (4%), along with the West Midlands (3.9%), South West (3.8%) and Yorkshire and the Humber (3.8%). 

Lee Martin, head of UK for Unlatch, comments: “New-build homes command a far higher price in the sales market and this house price premium will impact the initial yield an investor can expect to see compared to an existing home, despite these properties commanding a far higher value where monthly rental income is concerned.”

“However, they are fast becoming the investment route of choice and this trend is undoubtedly being driven by the Build-to-Rent boom and the increasing demand from tenants for better rental homes with a lifestyle focus.”

Martin says new homes offer a wealth of benefits for investors when it comes to boosting their profit margins.

“Running costs are considerably lower as new-builds are substantially more energy-efficient and the better level of build quality and compliance means that maintenance costs are also reduced,” he adds.

“The Build-to-Rent proposition, in particular, also offers the opportunity to invest in the rental market but with a more hands-off approach, which can save investors a considerable amount of personal time and money.”