The London and South East Build to Rent Market: Opportunities and Challenges in 2025

Sam Smith, Chair of the Association for Rental Living London and South East Hub, shares his views on the opportunities and challenges for BTR in the region in 2025, and outlines the key activities of the Hub.

London’s residential rental market has long been underpinned by a supply and demand imbalance, with affordability and quality of rental stock at the forefront of challenges facing renters. Build to Rent (BTR) has emerged as a viable solution, offering professionally managed, high-quality rental accommodation designed to meet the needs of modern urban living. But what is the current state of the Build to Rent market in London and the South East, and what opportunities and challenges lie ahead?

Over the past decade, the BTR sector in London and the South East has expanded rapidly, with institutional investors, developers, and operators recognising the potential for long-term, stable income streams. According to the British Property Federation, London remains the dominant BTR market in the UK, but the South East is seeing increasing interest as well, particularly in commuter towns and cities where demand for high-quality rental homes is growing.

Developers have been drawn to BTR as an alternative to traditional build-to-sell models, particularly in the face of fluctuating sales markets. The sector has evolved to cater to different price points, from luxury developments with extensive amenities to more affordable schemes designed to cater to key workers and middle-income renters as well as the largely published growth of the Single-Family Housing (SFH) in the regional commuter belts. In the South East, SFH & BTR developments are increasingly in towns such as Reading, Milton Keynes, and Brighton, where affordability pressures in London have driven renters to seek alternatives.

London and the South East continue to attract substantial investment in the BTR sector. Institutional investors see BTR as an asset class that provides resilience against economic volatility. The region’s strong rental demand, driven by a young, mobile workforce and high barriers to homeownership, makes it an attractive location for long-term investment.

Despite challenges such as construction cost inflation and planning complexities, the number of BTR homes in London and the South East has grown significantly. The shift towards more suburban BTR schemes—where land values are lower, and developments can offer larger homes with outdoor space—is also becoming more prevalent.

While the outlook for the BTR market in London and the South East is positive, several challenges remain:

The planning system in both London and the South East continues to be a major hurdle for BTR developers. Long approval timelines and affordability requirements can impact scheme viability. The new London Plan has provided some guidance, but navigating the regulatory landscape remains complex.

As rental prices continue to rise, there is increasing scrutiny over affordability. While BTR offers a higher standard of living, it must balance premium pricing with accessibility for a broader demographic of renters.

Managing large-scale rental communities requires sophisticated operational expertise. High-quality customer service, technology integration, and community engagement are essential to ensuring tenant retention and satisfaction.

Interest rates, inflation, and broader economic factors all have an impact on investment decisions and rental growth projections. A cautious investment approach is required to navigate potential market fluctuations.

Despite these challenges, the long-term fundamentals of the BTR market in London and the South East remain strong. The demand for professionally managed rental homes will continue to rise, particularly as younger generations prioritise flexibility and lifestyle over homeownership. Innovation in design, sustainability, and tenant experience will be key differentiators for future developments.

The sector is evolving beyond just providing rental accommodation; it is shaping the future of urban and suburban living. Operators that focus on community-building, sustainability, and technology-driven services will be best positioned to succeed in an increasingly competitive market.

In its first year, the London and South East Hub has tackled some of the key challenges facing the sector. We hosted our first event in Q1 2024, focusing on recruitment challenges, followed by our inaugural study tour in London over the summer. Kicking off 2025, we have already hosted our first Study Tour in Brighton which was hugely successful.

This year, we continue to focus on key industry topics and challenges, so stay tuned for our upcoming events!