Although Build to Rent is comparatively a new concept, it has been in the real estate market for a couple of years now. BTR refers to developing properties that are meant for the sole intention of renting and not for long-term ownership.

The BTR concept was introduced in 2012 as part of the Olympic Games, following which many new rentals were developed based on the idea. Many of these even have backing from the government’s Home Building Fund.

How is Build to Rent properties different?

The Build to Rent concept has been increasing in popularity as the rental market, in general, has been becoming more popular. More people may be turning towards renting due to a lack of for-sale properties that are affordable or better-quality rentals. Increasing mortgage rates may also account for the change in preference.

Responding to the requirements in the property market, more developers are opting for BTR developments to cater to the lifestyle preferences of renters.

– These homes are being designed as per modern living standards.

– Some of them even exceed expectations provided the renter can afford the rents being asked for.

– Developers are trying to develop mini-communities, including communal areas for tenants to socialise and hang out.

– Other features include gyms, lounges, game rooms, and even a concierge in some properties.

What are the benefits of Build to Rent?

In providing a new standard of living, Build to Rent properties provide many benefits for tenants:
– They are available at various price points, thus catering to budgets of all kinds of letters and renters.

– These properties and resulting communities cater to all segments of people, from a young couple looking to start a family to a senior citizen looking for a peaceful space to retire and live in.

– Buying in prime city areas is expensive. BTR is a solution for this requirement with prime locations and close proximity to grocery stores, work, tube stations, nightlife etc., in addition to gorgeous city views.

– BTR management will be keen on retaining clientele, so any issues regarding maintenance and complaints will be attended to immediately.

-These are meant for long-term income. In order to retain the long-term interest of tenants and the community, developers will sustain top-quality public spaces and commercial spaces in and around the property to attract more occupants.

Can Build to Rent properties be sold?

As it’s a new segment, there is no clarity for now if these developments can be bought and sold. If they are a means of consistent rental income for investors, rules and regulations may be put forth, considering it as a separate segment in the real estate market.

However, planning authorities should bear in mind that build-to-rent developers would want a certain level of flexibility and time to respond to market conditions. Exit clauses that aren’t favourable will impede development. Also, affordable housing shouldn’t be at risk due to the sale of BTR properties.

Although owning property may seem more manageable now due to the falling prices, renting scenario isn’t as promising due to the skyrocketing rents. Rents spiked by 12% last year, which amounts to £117 per month (or £1400 per year). This is more than the wage increase, which is about 6% in the past year.

Rental affordability is at the highest it has been in a decade, at 35%. It is the percentage of income that goes as rent from a person renting a property. The rental market consists of new lettings (a quarter of the market) and continuing lettings, which account for 75% of the market. These are people who decide to stay put, even though there may be changes in rent. The supply issue in the rental market is getting compounded as renters are opting to stay in current rentals and face higher rent.

Will rentals get cheaper?

The current demand and supply situation in the rental market is a cause of concern amidst rising rent rates in 2023.

– Demand has increased by 46% while supply is less by 38%.
– Rental prices have spiked.
– Potential first-time buyers are opting to continue renting due to rising mortgage rates. Hence the demand rate is worsened.
– The current pace of renting worries private renters, specifically those on a low income, as it has worsened the cost of living and related pressures.
– If the rate of rental spike continues at 12% in 2023, renters would have to spend as much as 37% of their earnings to cover rent.
– This would only be feasible for some and could affect spending power with a significant impact.
– Combined with only a slight improvement in supply, it could lead to a slump in the rental market, with growth as low as only 5% in 2023.

The only way to make renting cheaper than it is now would be to boost the rental supply, which does not seem too likely in the coming months.

Will rental supply improve?

Rental supply could improve modestly in the few months ahead. Homes that have been put on rent have increased slightly since the sales market has weakened. Those looking for the opportune moment to sell have kept their plans on hold due to the uncertainty in the sales market and have instead put their homes on the rental market.

However, rental inflation is still high due to increasing demand, thus adding to affordability concerns for renters. As a result, more renters are –

– Sharing homes to spread out the expenses and costs
– Choosing to live with parents
– Opting for smaller homes

Does the rental market look promising in 2023?

As per proposed rules and regulations, private landlords who own expensive homes are more likely to sell up due to the difficulty in managing expenses. Losses in such rented homes will impact new investments pouring into the build-to-rent properties.

The rental market will witness more demand, and it is vital to invite more supply from landlords – private individuals or corporates.

If you are interested in renting a property in the United Kingdom or searching for rental properties, please get in touch with us at Glentree Estates.