Knight Frank Observes that Rental Stock in the UK is Still in Short Supply!

The value of the UK’s Build to Rent market has grown from £35bn in 2019 to £56bn today – a rise of 60% – according to Knight Frank analysis.

The company predicts this sharp growth will continue, with the BTR pipeline estimated to boost the current value to £102bn by 2028 – a rise of 82%.

The analysis is contained in Knight Frank’s latest annual Multi-housing Report.

According to the firm, £3.2bn of capital has been committed to the UK’s BTR sector during the first three quarters of 2022, with a further £650m expected to trade before the end of the year. Knight Frank says this would take full-year investment to £3.8bn – 31% higher than the 2016-2020 long-term average.

According to the report, there are more than 72,000 completed BTR homes in schemes of 75 units or more across the UK. A further 57,000 units are currently under construction and an additional 61,000 have full planning permission granted.

These numbers bring the total BTR pipeline to 190,000 homes, excluding sites in pre-planning. According to Knight Frank, some 24% of local authorities now have at least one BTR scheme open and operational within their jurisdiction.

However, even with a strong delivery pipeline, Knight Frank observes that rental stock in the UK is still in short supply.

There have been more than 260,000 buy-to-let mortgage redemptions over the last five years as private landlords look to exit the market. Meanwhile, unemployment is near record lows, the population continues to rise, wage growth remains strong, and access to mortgage finance is restricting owner occupation. This outlook is supporting rental growth, the report said.

Oliver Knight, head of residential development research at Knight Frank, commented: “Prospects for rental growth will also be supported by the fact that the proportion of earnings spent on rent has been steadily declining in recent years and sits below the long-term average.

The average renter spent 35% of their pre-tax income on rent in 2022, down from closer to 40% five years previously. For couples and sharers, this figure will be even lower.

“Whilst we expect our rents will moderate from current highs in 2023, we believe there is headroom in the market for a period of above-average rental growth.”

As part of its research, Knight Frank looked at population and employment forecasts to identify the UK’s high-growth markets with the potential to be BTR hotspots in the coming years.

The company named Norwich, Peterborough, Cambridge, Ipswich, Stevenage, Chelmsford, Watford, Oxford, Windsor, Maidenhead, Bracknell Forest, Leatherhead, Woking Tunbridge Wells, Portsmouth, and Exeter as emerging growth markets.