Overview

In Q3 2024, the UK saw £800 million in investment activity—a significant increase compared to last year. This funding supports housing delivery in partnership with housebuilders and contractors. However, the construction pipeline has shrunk by 20% over the past year, with record completions not matched by new construction starts.

Additionally, the private rented sector (PRS) is showing signs of contraction. Build to Rent (BTR) investment is essential to replace lost rental supply with higher-quality, energy-efficient homes. Local authorities need to be more proactive in BTR delivery to meet growing demand.

SFH as a Key Investment Component

Single Family Housing has become a vital part of the UK residential investment market, accounting for half of total BTR investment in the past year—its highest proportion ever.

Key Players in the SFH Market

Growth in the SFH market includes both established and new investors. Notably, Countryside (now Vistry) and Sigma Capital have contracted over 8,000 homes. New partnerships, such as Vistry with Leaf Living, aim to deliver over 3,200 SFH homes by 2027.

A Shift Back to Single-Site Agreements

As sales to homeowners slow, institutional investors are seizing opportunities. Bulk deal investments reached £1.2 billion in the year to Q3 2024, while single-site SFH investments rose from £0.27 billion to £1.2 billion. With falling interest rates, the sales market is expected to strengthen, potentially leading to more single-site, purpose-designed developments.

Housebuilders are adapting their business models to include PRS partnerships, signaling a long-term commitment to SFH. They recognize the benefits of multi-tenure schemes, which can speed up delivery and improve funding for local infrastructure.

The Rise of Bespoke SFH

Investors are increasingly seeking custom-designed SFH that cater to the rental market, focusing on smaller units, sustainability features, and proximity to amenities. Housebuilders must develop pre-planning strategies to differentiate these homes from those for open market sale.

UK BTR Investment Overview

In Q3 2024, £800 million was invested in UK BTR, the second-highest Q3 figure in four years. To match the £4.5 billion invested in 2023, Q4 will need to exceed last year’s £1.9 billion. So far in 2024, 75% of transactions have focused on new home development, with SFH making up 50.4% of total investments.

UK BTR Development Insights

The UK’s BTR stock now exceeds 120,000 completed homes, a 23% increase from Q3 2023. There are 50,000 homes under construction and 103,000 in the planning pipeline, totaling 274,000 homes—up 5% since last year.

Despite record completions of 22,300 homes in the past year, new construction starts are declining, leading to a 20% contraction in the construction pipeline.

This evolving market presents exciting opportunities for our Build to Rent services, positioning us to help investors navigate these changes while delivering quality housing solutions.

Sources: Savills Research, British Property Federation (BPF)