Larger homes taking bigger share of Build To Rent market - new figures

Increased demand and investor appetite for purpose built Single Family Rental schemes have seen this niche market grow at scale, according to new research by Savills.

Over the past 12 months, 31 additional SFR schemes have become operational in the UK, delivering 2,000 new homes. At the same time, the planning pipelines have doubled in size, and now there are over 15,000 SFR homes either under construction or in planning.  

The agency estimates SFR schemes are set to constitute some 18 per cent of the Build To Rent market over the next decade, as the demographics and economics of renting change.

Savills research estimates that with the current momentum, and the weight of capital chasing the sector, there could be 30,000 SFR homes in operation by 2027 and more than 70,000 by 2032.

“With the supply of homes for private rent shrinking and investor interest growing, SFR can play a key role in helping to meet housing needs, particularly those of young or growing families, and reduce the significant supply shortages in the rental market” comments Savills’ research chief Jacqui Daly.

“Due to a significant influx of interest in the sector, SFR is coming forward in over 100 local authorities across the UK and is anticipated to continue to rise. This geographic expansion has been supported by the improved viability of the South, combined with investors seeking geographically diverse schemes to have balanced portfolios. In particular, investors have recognised the great housing need in this region, with many concentrating strategies on markets with the greatest need for supply.”

Savills says the rental market has witnessed nearly 250,000 buy to let mortgage redemptions in the last five years, and Rightmove is reporting 30 per cent fewer flats and houses available to rent compared with the pre pandemic 2017-2019 average - the agency says this is emphasising the enormous need for increased delivery of rental housing and the key role that SFR can play in replenishing stock.

In particular, Savills analysis shows that 60 per cent of SFR households have children, compared with just 30 per cent of households across the wider private rental sector, demonstrating its potential to play a key role in family housing provision nationally.

The latest figures show that 66 per cent of SFR tenants are aged between 26 and 45 and stay for three years or more. 

“As new investors enter the space, we are likely to see an evolution of the SFR model, with investors seeking larger schemes where economies of scale can be driven. In the last 12 months alone, the average site under construction has grown by a third and the average site in planning has grown 52 per cent” says Piers de Winton, head of national residential investment at Savills.

“It's also vital that SFR operations should continue to adapt to changing tenant needs. Changes such as allowing tenants to decorate their space have proven successful in increasing the length of tenancies and fostering a sense of community. As electric vehicles become more common, the provision of charging points will also continue to rise up tenants' priority lists. At the same time, it can improve the overall quality and energy efficiency of housing stock, at rents that are affordable to middle-income households.”