For many years now, Build to Rent (BTR) has been one of the property market’s fastest-growing trends. The increasing popularity of this sector reflects the population’s shifting attitudes away from occupier-owned homes to that of privately rented homes. As the property industry falls back into ‘normality’ post the Covid-19 outbreak, CBRE’s latest research suggests that BTR will bounce back sharply in 2021 and outperform other sectors over the next five years.
This sector is an attractive option for both investors and developers thanks to the prospect of steady rents, steady income streams, and support from the government. So, what problems can BTR solve for housebuilders and developers? As the BTR platform for developers and housebuilders, here are our thoughts…
The housing market regularly fluctuates, and following the Covid-19 pandemic, we’re expecting to see it become even harder to get on the property ladder. Although the Financial Times predicts that house prices are projected to fall (dramatically), lenders have become stricter about who they lend to amid fears of defaults.
But it doesn’t stop there, property experts predict the economic fallout of the pandemic will also ‘deepen inequality of access to housing’, which is where we come in. Our BTR platform gives housebuilders and developers the opportunity to open up bigger, mixed tenure sites. Providing open market houses for those looking to buy, and market rental homes for those looking to access the perks of high-quality homes, at a fraction of the price.
Opening mixed tenure developments can benefit developers for many reasons, from building a better sense of community for multiple societies (resulting in positive economic growth), through to providing a solution to the UK’s current housing crisis. A mixed tenure scheme provides a diverse range of options for multiple demographics across the country, including:
- Young professionals who are struggling to get on the property ladder can rent a home on the same development whilst saving for their deposit, giving them the ability to interact with the local community they want to buy in.
- Mature couples and families who are looking to downsize from their current property yet stay living in their existing community they call home, have the option to move away from the hassle of homeownership with the perks of renting a high-quality home.
- Those not yet looking to settle down & purchase attracted to the flexibility that renting can offer.
A mix of tenures can also help developers reduce their exposure to open market sales. The analysis of the sector speaks for itself; the number of mortgages plummeted by almost half both during and after the UK lockdown. According to financial data firm Moneyfacts, in March there were 779 products for borrowers with a 10% deposit, while the figure is now closer to 70. The harder it is for the potential buyers to access the lending they require, the harder it will be for developers to sell.
On the other hand, you have the BTR sector – which was barely affected. We launched our third development in Mansfield during the peak of lockdown and achieved a 100% reservation rate in just a matter of weeks. And our existing Wise Living developments? They maintained strong rental income, with only a 0.2% decrease during the pandemic.
Another problem BTR can solve? Planning permission. Data obtained from Shelter states as many as 40% of the homes granted planning permission between 2011 and 2017 remain unbuilt. BTR provides a solution to both this problem and the greater housing shortage issue across the UK. By creating larger developments with more BTR units to market, developers have the ability to develop these a lot quicker than a traditional open market site.
There are warning signs that the huge focus on London and the south of the country can worsen the most deprived parts of the UK – the areas that would benefit the most from decent homes and great places to live. Our ethos is all about delivering decent homes and great places to live for communities across the county, whether that’s working with developer partners on schemes in Hull, right down to Bristol. Our focus on urban regeneration areas helps to solve the problems local authorities and government are seeking for their local areas by delivering new, much needed homes at pace.
The final area we see the incorporation of BTR benefiting developers? The ability to forward-fund opportunities. Wise Living was created to help forward-fund a number of elements that traditionally were deemed as ‘risky’. Our approach is to ‘back to back’ the land with our developer partners and simultaneously enter into a build contract for them to build it on our behalf. Under this build contract we will pay them monthly based on build progress on site which effectively means we cashflow the build all the way through.
Our final thoughts…
It’s fair to say that there are huge opportunities in the BTR sector, for developers, for investors and for potential tenants. The standout themes for developers is the extra level of security it provides. If we enter another state of lockdown like we experienced from March to June, data shows that people were still looking for decent homes and great places to rent.
As one of the fastest growing single-family BTR providers in the UK, our experienced team are uniquely placed to provide all services form under one roof. We can assist with identifying the ideal sites for our renters, through to maintaining our properties and communal spaces to a high standard.