An estimated £1.12bn was invested in the BTR market in Q1 2023, according to Cushman & Wakefield’s recently published Q1 2023 Build to Rent Report.
The paper claimed that BTR developers, with a de-risked exit route, now have the ability to be more competitive against housebuilders.
In turn, this has created an opportunity for investors who are willing to build their BTR portfolio through direct development or joint ventures.
The quarterly report highlighted that lower land values are expected to start filtering through to the funding market in the second half of 2023, and this combined with positive investor sentiment, and greater political and economic certainty, should result in increased investment in the BTR market.
Findings in the report include:
• the UK, excluding London, has experienced annual growth of 9.1% in March 2023, while London saw a rise of 11.8%
• some 2.5 million PRS properties in England have an EPC rating of D or below
• just over 60% of renters in the UK PRS are under 35
• a strong imbalance between supply and demand has continued to support UK rental growth
• the MSCI universe has seen big shifts in the composition and value of real estate. In 2007, 80% of held stock was office and retail, with residential only accounting for 2% of its total capital value. In 2022, office and retail only made up 43%, and residential increased to 11%
• confidence from investors has continued to grow since the beginning of the year, with Q1 2023 seeing an estimated £1.12bn of investment
Eliot Kaye, managing director at Puma Property Finance, commented on the findings: “Many people are having to push back homeownership aspirations as a result of higher interest rates and unaffordable property prices, while students are experiencing a better standard of living while at university and want a similar style of living when they graduate and move to be near their place of work.
“As a result, we expect demand for well-located BTR developments to continue over the coming years.
“To deliver on this demand, developers and their funders need to ensure that the product is right for the particular micro-market, balancing the right levels of amenity provision with the need to offer competitive rents.
“With the factors of affordability, amenity, community and flexibility at the front and centre of the minds of many potential tenants, we are confident that the BTR market will continue to evolve and grow to meet these needs, providing a compelling accommodation option and an attractive investment proposition.”
