The recent surge in investment in the UK Build to Rent (BTR) sector has caught the attention of investors worldwide, with a remarkable influx of over £800 million during the first quarter of 2025. This substantial figure represents the highest investment for a first quarter since 2022 and follows a record-breaking final quarter of 2024. The substantial capital influx into developing multi-family schemes in urban areas signifies a notable shift away from the previously restrained forward funding for large-scale projects. For the fourth consecutive quarter, international investments have surpassed domestic ones. This trend is largely attributable to supply shortages, affordability challenges, and rising rents, all of which contribute to the strong demand in the UK rental market. Highlighting this trend, significant transactions have been made, such as Hill & Peabody’s forward funding project in Dagenham and Legal & General’s collaboration with Nomura to create over 1,000 rental homes.
Shifting Trends in the BTR Market
In 2024, the completion of 18,000 Build to Rent homes accounted for 8% of new build completions in England and Wales, marking an increase from 5% in 2019. However, the overall contribution of BTR properties to the UK’s private rental market remains modest, making up only 2% of the sector. Compared to international markets such as the USA, the UK’s BTR sector is still in its infancy, but the growth trajectory is unmistakable. The heightened interest from overseas investors is primarily driven by attractive rental yields and the ongoing supply-demand imbalance in the UK housing market. As affordability issues persist, more residents are turning to rental options, creating fertile ground for further expansion of the BTR sector. This trend highlights the evolving landscape, where renting is becoming an increasingly attractive and permanent solution for many, giving an upper hand to investors willing to tap into this burgeoning market.
Future Outlook for the UK BTR Sector
Looking ahead, a spokesperson from Savills has underscored the continued growth and investor interest in high-quality rental homes, with expectations for the momentum to continue across both multi-family and single-family developments throughout the coming year. International players like CompassRock have also made strategic acquisitions, such as the recent procurement of 295 apartments in Bristol, indicating a broadening of the scope for BTR investments. As the appeal of build-to-rent homes continues to grow, driven by supply shortages and persistent affordability issues, the sector is positioned to play a pivotal role in addressing housing needs. The UK’s BTR market is not only meeting immediate demands but also adapting to long-term shifts in housing preferences. The prospect of sustained growth offers a compelling opportunity for investors aiming to secure substantial yields, facilitating a more sustainable housing market.
