Build-to-rent growth to continue as ‘uncertainty increases demand’
New data from the British Property Federation (BPF) has shown how the shift away from the capital is likely to continue, after the number of units in planning in the UK regions overtook London.
The capital had 4,000 fewer build-to-rent homes in planning at the end of March than a year ago, but the regions had 12,600 more.
Leading developer Moda Living told TheBusinessDesk.com the “huge supply and demand imbalance” would remain in the regions post-Covid 19. Last week it submitted a planning application for its 722-home Great Charles Street scheme in Birmingham city centre.
The West Midlands is responsible for an increase of 4,700 homes while Yorkshire rose by 2,400.
Although the East Midlands is a much smaller market, it now has a total of 2,131 build-to-rent homes in planning, which is more than was in the whole development lifecycle last year.
Ian Fletcher, BPF’s real estate policy director, said: “Pain is being felt across all sectors of the economy, but build-to-rent remains attractive to investors and we know from past experience that demand for rental housing usually leads homes-for-sale out of any recovery.
“One concern is the London pipeline – the statistics show a sharp decline in the number of homes in planning across the capital. The imbalance between housing demand and supply has not gone away.”
The BPF believes the “robust pipeline” of new built-to-rent homes in planning across the regions means “the number of homes under construction should rise again”. However London has seen a decrease in the number of homes in planning, falling by 10% since the end of Q1 2019.
London did see a second-consecutive annual jump of around 4,000 completions, achieving 20,770 in Q1.
In the regions the number of completions surpassed London after a 58% increase took the total to 22,466.
Both Yorkshire and the West Midlands more than doubled the number of completions, while the North West was the region with the largest actual increase – up 3,875 to 11,161 homes.
Savills produced the data for the BPF, and draws on Molior data in London.
Its residential research director Jacqui Daly believes the current uncertainty will increase demand for rented accommodation while maintaining pressure on the leveraged buy-to-let sector – driving demand into build-to-rent.
She said: “This means that once lockdown is lifted, build-to-rent developers should be confident to progress stalled developments.
“Also, housebuilders will face particular pressure to restore their sales rates when restrictions on doing business are lifted so we could see a greater role for build-to-rent to absorb stock.”
Moda Living has become a major force in the build-to-rent sector in six years. It has a £2.5bn development pipeline outside London and is responsible for landmark schemes in the changing cityscapes of Manchester, Birmingham and Leeds.
Moda’s managing director Johnny Caddick remains confident the long-term foundations remain solid despite the economic earthquake.
“The reason we established Moda in the first place was because of the huge supply and demand imbalance in the market for residential rental stock, and that hasn’t gone away even as a result of Covid-19,” he said.
“Built to Rent is about long term stable income for our investors and those fundamentals are still there. So from our perspective, with Moda we have a large pipeline of projects and the current situation might slow things down a bit because of various challenges.
“But the fundamentals are still there and we’re excited to be delivering on our business plan which is to get more projects on site this year, next year and so forth into the future.”