UK private sector gaining traction in the rental sector due to Build-to-rent scheme – recent study shows that almost one third of new property developments in the first quarter of 2015 are specifically for rental.
A study by the law firm Addleshaw Goddard to be published on August 3rd has indicated that Britain could be on the cusp of a ‘rental revolution’, with around £30bn of Institutional investment specifically earmarked for the building of new homes for rent. This figure is unprecedentedly high in a nation that has held a traditional tendency towards owning property rather than renting.
The law firm, together with the British Property Federation, believe that the recent government legislation (2014) of Build-to-Rent has been the cause for substantial new investment for the rental sector and new build houses.
Much of this has been spearheaded by investment for new property developments from single companies rather than multiple speculators or individual investors, in a manner similar to the American multifamily sector.
Build-to-rent has had a definitive impact upon the growth of new builds earmarked for rental
Build-to-Rent is defined by the government as ‘a fully recoverable investment where the government shares risk or bridges finance to help schemes to build, managed and let’. This now allows developers to shift some of their risk onto the government, which enable them to take on additional projects. A study by EC Harris reached the conclusion that the build-to-rent scheme ‘could have much wider potential across England than previously thought’. Indeed, the scheme could partially resolve the current housing crisis.
Build-to-rent ‘could have much wider potential across England than previously thought’.
New build properties can also be an attractive investment for the buy-to-let investor. Studies have shown that new build rental homes attract, on average, a third higher rents than older properties. As such, any investors looking to take on a long-term project that could provide higher yields should take build-to-let into consideration rather than simply buy-to-let.
The concept behind build-to-rent has partially been adopted from the American concept where listed companies own a significant proportion of housing stock. These properties tend to be more communal and of higher quality than other building schemes.
With this in mind, the UK rental market could become more integrated with the construction sector, as individuals and companies alike seek to take advantage of the government build-to-rent scheme.