Investment surges into Build To Rent Single Family Housing

Over £1 billion has been invested in the burgeoning Build To Rent Single Family Housing sector in the first three quarters of the year.

And investors are seeking to deploy a further £25 billion in the next five to 10 years, the agency says.

According to Savills latest UK Single Family Housing Spotlight report, 2023 had already become a record year by late spring, boosted by several significant deals including Project Domus, the sale of 918 homes in the North West from Goldman Sachs to PGIM.

A slowdown in new build sales rates means more housebuilders are looking to weave SFH into their business models. 

Although UK housebuilders are becoming more active, with nearly 2,000 homes sold to institutional and other large scale investors, supply remains suppressed with 18.5 per cent fewer properties available to rent in comparison to the 2017-2019 average.

According to Savills, a key factor driving lower supply in this market is the decrease in turnover for rental properties. This can be attributed to buy to let landlords leaving the housing market and is evidenced by the rise to 43 per cent Q2 23, of landlords intending to sell property in the next year.

Piers de Winton, Savills’ head of national residential investment and single family, comments: “The fundamentals for investing in SFH remain strong as demand continues to outstrip supply. The shortage of houses across the country has seen that there is an increased demand for rental properties which will in turn push up the cost of rents. 

“There is unlikely to be a shortage of demand given the aspiration of homeownership has become increasingly distant in a higher interest rate environment. Tenants demand for amenities such as proximity to local schools, green spaces and health services is also on the rise and SFH offers such benefits. SFH clearly has a role in alleviating the UK’s supply crisis, but will need to scale up considerably if it is to shift the dial.”

SFH developments have traditionally been limited to supply in the North West, but Savills notes a geographical shift to the Midlands and the South; 95 per cent of investors are targeting locations in the South East with 85 per cent targeting the Midlands and 80 per cent targeting the South West. 

This shift can be attributed to the increased viability of rental growth and investors looking to diversify their portfolios. The South is also where housing is needed the greatest so we are seeing investors focussing their strategies on markets with greater need of supply.

In the drive towards net zero Savills says it’s seeing more investment into sustainable developments and the agency’s research indicates that most SFH homes have been delivered with EPC ratings of B or above. Looking ahead, all investors are targeting a minimum of EPC B with 21 per cent targeting an EPC A. 

Savills says this will help to improve the quality and energy efficiency of the Private Rented Sector, where 58 per cent of existing dwellings are at EPC D or below.