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Build to Rent sector to be worth £50 billion by 2020

Private Rental January 21st, 2016
Build to Rent sector to be worth £50 billion by 2020

According to Knight Frank, the future of rental market construction in the UK lays upon the foundation of the Build to Rent scheme.

The report provided key insights into the future of the UK property market. The company spoke to various property investors and found that large-scale investment is set to triple by 2020, with total investment reaching new heights of as much as £50 billion. According to these predications, the sector will also account for 5% of the overall rental market fuelled by growing demand for young urban tenants. These investments are fuelled by the potentially lucrative yields as a result of the recent government Build to Rent policy, which offers investors an average gross to net yield of 26% for new developments.

The Build-to-Rent scheme was launched in 2012 as part of a series of government initiatives to increase the supply of quality homes available for market rent in the private sector. It is a fully recoverable loan for commercial investment which can cover up to 50% of eligible development costs.

Knight Frank interviewed 16 key large-scale investors in the build-to-rent market to ascertain their personal views on the sector and its future by 2020. All respondents planned to equal or increase their current investment over the next 5 years, and 71% of respondents said that they would be holding their assets for more than ten years. If you want to read the report yourself, click here.

The firm noted that land supply is seen as the biggest obstacle to developing the PRS in England & Wales. However, this may be eased in future by the relaxation of the regulations on Green Belt land, which may offer increased land supply, particularly around the significant cities. In recent months, increasing numbers of firms have announced plans for ambitious building projects. L&Q has launched its project to create 5,000 new homes for the Build to Rent sector in London and South East England over the next five years, already having a property management portfolio of over 70,000 homes in these regions. The company claim that this project will be “the UK’s largest selection of purpose built and newly refurbished rental properties…offering a wide selection of well-appointed, purpose-built or newly refurbished rental properties in great locations to suit their lifestyle and their budget”.

As these large projects become more prominent, the supply crisis may, hopefully, become less problematic for the UK housing market. However, these policies will represent a radical change to the UK market. Having historically been a nation of home owners, changing generational attitudes, government policies, and private sector projects will trigger further reductions in the owner-occupancy numbers over the next ten years.

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