Build to Rent Set to Triple in Size to £50bn by 2020

Investment by large-scale investors in the Build to Rent sector is expected to triple by 2020, according to a recent report from Knight Frank.

Build to Rent Set to Triple in Size to £50bn by 2020

The property firm estimates that this growth will take the total investment in the sector to £50 billion in the next five years, increasing the size of Build to Rent from 2% of the private rental sector to 5%.

This prediction forms part of the Investor Survey from Knight Frank, which includes a study of 16 large-scale Build to Rent investors. The firms shared their views on where gross yields will stand around the country in 2020. They estimate that yields in regional city centre markets will settle 1.75 basis points higher than London, assuming that the economy performs in line with market expectations.

The Tenant Survey report includes the results of a nationwide study of private rental sector tenants – the largest survey of its kind ever conducted, with over 5,000 respondents.

The research, undertaken alongside YouGov, found:

• More than half (52%) of tenants said living close to work or their place of study is a priority.
• 30% of renters reported that their main reason for moving was to upgrade to a larger or nicer home, emphasising the flexibility of renting.
• 38% of respondents have lived in five or more rental properties. While many tenants have moved within one mile of their previous home, around a fifth (19%) have moved more than 60 miles, citing relocation for work or study.
• 28% of tenants across the country said they would be prepared to pay up to 30% of their gross income on rent, with almost a third (31%) of under-25-year-old renters in London prepared to pay up to 50%.
• A quarter of private tenants live alone, while 34% live as a couple without children. 43% of 18-24-year-olds share with other adults in a flatshare.

Head of UK Residential Research at Knight Frank, Grainne Gilmore, comments: “The Tenant Survey shows us that priorities for tenants when choosing a property include proximity to their place of work or study, how easily they can reach transport links and how affordable the property is.

“Tenants are mobile, owing to the flexibility offered by renting as a tenure, and while the motivations for moving vary, the largest cohort of respondees identified the wish to upgrade to a bigger or nicer property as their key motivation for moving into their current rented property.”¹

James Mannix, Head of Residential Capital Markets at Knight Frank, adds: “The results from the Tenant Survey and the Investor Survey demonstrate that there is a generational shift in the market, both amongst renters and investors, which stands a good chance of both stabilising the volatility of the housing market and satisfying some of the structural shortfall in supply. One of the major controls on production of housing is projected rates of sale. The rental market could significantly accelerate this factor through immediate absorption.”¹

¹ http://www.propertyreporter.co.uk/landlords/large-scale-prs-sector-to-triple-in-size-to-ã¢50bn.html