2023 Trends for Build to Rent in the UK
2022’s residential real estate market was all about the growing importance of the environment element of ESG, the struggles with new developments and rising inflation and the affordable housing crisis reaching a peak in the UK and Europe.
In this article, we summarise everything we have learned about the residential landscape from market reports, industry events, podcasts, webinars in 2022, and bring projections for the 2023 market:
Build to Rent: Shortage in Supply, Abundance in Demand – Promising Opportunities for Investors
In the UK, the build to rent market is gathering more pace inside and outside of London with promising investment opportunities than any other country in Europe. The number of completed BTR units has tripled over the last five years due to the market needs; as well as the full year investment to BTR in 2022 has reached up to £3.8bn, 31% higher than the 2016–2020 long-term average according to Knight Frank’s 2022/2023 Multi Housing Report.
While UK’s investors have been influenced by the macroeconomic slowdown, they are still attracted to the rental sector. This is due to the resilience of the rental market in times of economic uncertainty – shortage of supply in rental homes and consequently scaling rents (up to 21% over the last decade), and growing tenant demand.
Projections for 2023’s rented residential market in the UK underline that the rental growth will persist, reaching slightly under 50%of the spending of the pre-tax income of an average tenant.
“Rising costs will not detract from the desirability of residential investments in the long run. The underlying fundamentals of the residential market are strong and will remain strong,” said Mark Kuijpers from Greystar at the European Residential Investments panel at EXPO Real 2022.
Build to sell is losing traction in the young generation in the last couple of years due to inflation and increasingly harder-to-get mortgages; and this has caused renting to almost become a lifestyle choice.
The current BTR, co-living and student housing market mainly targets the 18-35 age bracket, with a focus on flexibility, easy access to urban spots and social life, and professional maintenance. For example, in a tenant demands and needs survey conducted in November 2022, more than ¾ of London-based tenants found location to be an important factor for their living experience; while they also highly value seamless maintenance perks such as parcel services or online issue reporting.
Buildings with high customer service scores have the strongest correlation to professional management – including high-level communication with tenants, elevated convenience of living with the help of technology, community activities, a dedicated facility team taking care of issues, amenities and spaces for activities, sustainability practices, concierge and storage services as well as a strong focus on tenant wellness, safety and security.
In our estimation, these trends will shape much of the residential real estate dialogs in 2023 in the UK. We’ll regularly update our audience on these trends as they come, since the market is subject to change at all times!